## 1bdiea2023001

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### Executive summary: context, shocks, and prior IMF support
- Burundi described as fragile with political tensions since 2015 and weak institutions.
- Recent shocks: COVID-19; spillovers from the war in Ukraine; delayed rainfall; livestock fevers (Rift-Valley fever and porcine fever).
- IMF-related assistance received and allocations:
  - Catastrophe Containment and Relief Trust: SDR 17.96 million.
  - Rapid Credit Facility disbursement: SDR 53.9 million (35 percent of quota).
  - 2021 SDR allocation: SDR 147.6 million.
  - SDR allocation use as of May 31, 2023: 92.5 percent (SDR 150 million in 2022 and SDR 55 million in 2023 out of SDR 221.45 million).

### Recent macroeconomic developments and key statistics
- Growth and inflation
  - Real GDP growth: 2021: 3.1 percent; 2022: 1.8 percent.
  - Inflation averaged 18.9 percent in 2022; accelerated to 32.6 percent (y/y) in April 2023.
  - Food inflation: 24.5 percent in 2022; 48.2 percent (y/y) in April 2023.
  - Domestic pump prices adjusted by 20 percent in 2022:Q1; transportation fees by 30 percent.
- External sector
  - Current account deficit widened to 15.6 percent of GDP in 2022 (12.4 percent of GDP in 2021).
  - Export price increases: tea 10.4 percent; coffee 48 percent.
  - Official reserves: US$ 160.27 million or 1.3 months of imports at end-March 2023.
  - Parallel FX market premium: 71 percent at end-January 2023; rose to 102 percent at mid-April 2023.
- Fiscal and public debt
  - FY2022/23:H1 fiscal deficit estimated at 5.6 percent of GDP (0.8 percent of GDP in FY2021/22:H1).
  - Revenue collection: 8.4 percent of GDP at end-December 2022 (9 percent of GDP at end-December 2021).
  - Fertilizer subsidy prepayment: 3.3 percent of GDP (covering 2022–24).
  - Central bank net lending during FY2022/23:H1: 3.8 percent of GDP (including on-lending of IMF SDR allocation 1 percent of GDP and ad-hoc lending for private sector financing 5.7 percent of GDP).
  - Treasury statutory advances decreased by 3 percent of GDP.
  - Public debt at end-2022: 68.4 percent of GDP.
- Monetary and FX measures
  - BRB halted 7-day refinancing window end-June 2022; suspended subsidized long-term refinancing early December 2022 (except agricultural projects).
  - FX liberalization steps since 2022:Q4 (examples): remittances withdrawable in foreign currency (effective October 7, 2022); transfer of FX accounts of international organizations and embassies to commercial banks (end-March 2023); operationalized FX interbank market on May 4, 2023.

### Program request, objectives, and major policy pillars
- Authorities requested a 38-month Extended Credit Facility (ECF) arrangement with access of 130 percent of quota (SDR 200.2 million).
- Program aims:
  - Address protracted BOP needs and rebuild external buffers.
  - Reduce public debt vulnerabilities and contain contingent liabilities.
  - Catalyse donor funding and support the 2018–27 national development plan (PND).
- Major policy pillars:
  - Fiscal: better-quality fiscal consolidation via higher revenue mobilization, scaled-up investment, and prudent borrowing.
  - FX/exchange rate: unification of official and parallel ER markets and FX liberalization.
  - Monetary: tightening monetary policy and modernizing the monetary policy framework (MPF).
  - Structural/governance: strengthen PFM, SOE management, anti-corruption, and growth-enhancing reforms.
  - Capacity development and safeguards intensification.

### Program financing and reserve targets
- Access and duration
  - 38-month arrangement; access of 130 percent of quota (SDR 200.2 million or US$ 266.9 million).
  - Front-loaded access: SDR 46.20 (30 percent of quota) disbursement at approval.
- Key financing and reserve targets
  - Raising FX reserves to 3.5 months of imports would require reserves to reach US$ 444.5 million in 2023.
  - Fiscal financing gap in FY23/24 (July−June): SDR 60.1 million.
  - Program assumes Fund disbursements equally used for budget financing and building FX reserves.
- Disbursement schedule (tentative)
  - SDR 46.20 — Availability date: July 17, 2023 — Condition: Executive Board Approval.
  - SDR 52.36 — Availability date: December 15, 2023 — Condition: Observance of performance criteria for July 31, 2023 and completion of first review.
  - Further tranches conditioned on QPC observance and subsequent reviews through June 15, 2026.

### Outlook and key projections (selected)
- Growth and inflation outlook
  - Growth rebound: projected 3.3 percent in 2023; 6.0 percent in 2024; medium-term around 5.7–5.9 percent.
  - Inflation projected: 20.1 percent (average) in 2023; 16.1 percent in 2024; medium-term gradual receding toward about 10 percent.
- Key macro series (Est./Proj. rows preserved)
  - Real GDP growth (percent): 3.1, 1.8, 3.3, 6.0, 5.9, 5.7, 5.9, 5.5
  - CPI inflation (period average): 8.3, 18.9, 20.1, 16.1, 10.1, 10.2, 10.0, 10.2
  - Public Sector debt (percent of GDP): 66.6, 68.4, 72.7, 65.8, 61.3, 56.6, 52.2, 48.0
  - Current account (percent of GDP): -12.4, -15.6, -17.6, -18.6, -18.3, -16.3, -13.7, -11.1
  - Reserves (months of imports): 2.5, 1.3, [blank], 1.9, 2.5, 2.7, 3.0, 3.4, 3.5

### Debt sustainability assessment and risks (DSA highlights)
- DSA conclusion: Debt assessed as sustainable but Burundi remains at high risk of external and overall debt distress.
- Main DSA signals and caveats:
  - All four external debt burden indicators breach thresholds under the baseline.
  - PV of public debt-to-GDP above benchmark in near-to-medium term but declining trend thereafter.
  - Public debt at end-2022: 68.4 percent of GDP; projected to peak 72.7 percent of GDP in 2023 under baseline.
  - Downside risks: delays in reforms, contingent liabilities, domestic shocks, prolonged external shocks.
- Capacity to Repay the Fund (CtR)
  - Under baseline, CtR adequate but subject to elevated risks.
  - Debt stock to the Fund peaks in T+2 at 9.2 percent of GDP, 69.7 percent of exports, and 81.7 percent of gross international reserves.
  - Debt service peaks later (examples): 6.2 percent of revenue and 33.6 percent of gross reserves in T+7; 6.7 percent of exports in T+8.

### Fiscal consolidation, revenue mobilization, and public spending priorities
- 2022/23 outlook and FY2023/24 program stance
  - Overall fiscal deficit projected to widen to 8.9 percent of GDP in 2022/23 from 7 percent in 2021/22.
  - Revenue projected to decline to 16.8 percent of GDP in 2022/23 (short of 19.6 percent budget target).
  - Spending expected to expand to 35 percent of GDP in 2022/23 due to overruns and fertilizer subsidy prepayment.
  - 2023/24 program: revenue IT 15.9 percent of GDP; total spending 35.6 percent of GDP; deficit projected to narrow to 4.5 percent of GDP.
- Domestic revenue mobilization (DRM) measures and administration
  - Implementation of 2022/23 and planned 2023/24 revenue measures: VAT, mining, informal sector taxation.
  - Digitalization: deployment of 3000 electronic cash registers linked to OBR; new IT system for electronic filing and payment expected July 2023.
  - Tax-expenditure rationalization: reduce tax expenditures from 3.6/2.6/2.5 percent of GDP (FY2020/21; FY2021/22; Jul 2022–Mar 2023) to 1.2 percent of GDP (FY2023/24 Budget).
- Spending priorities and safeguards
  - Contain subsidies and related contingent liabilities; fertilizer subsidies targeted to small farmers and vulnerable groups.
  - Civil service reform cost estimated 4.6 percent of GDP spread over 2023–33; 2022/23 budget allocation equivalent to 0.4 percent of GDP; draft 2023/24 plans 0.6 percent of GDP.
  - Public investment management (PIM) reforms and PIM assessment (PIMA) to improve project prioritization.
  - Social spending floor (IT) to monitor execution and protect social programs.

### Exchange rate unification and FX market liberalization
- Objectives and design
  - Unify official and parallel ER markets in 2023 to eliminate the parallel premium and rebalance external policy.
  - Official ER to be set by ER formula: weighted average of previous day’s FX transactions covering transactions between banks and between financial intermediaries and clients; legal text to describe formula.
  - FX market liberalization measures: facilitate opening FX bureaus; remove trade administrative constraints; lift domiciliation requirements at BRB; set up FX auctions with electronic platform.
- Recent actions and immediate effects (May 2023 and earlier)
  - MID (interbank FX market) launched effective May 4, 2023; official ER calculated as weighted average of previous day’s MID transactions with a +/- 2 percent margin for FX bureaus and bank-client transactions.
  - Automatic official ER depreciation about 38 percent from BIF 2081 per US$ to BIF 2875.16 per US$ on May 4, reducing ER premium—estimated around 42 percent.
  - MID transactional examples: May 4, 2023 BRB sold US$ 17 million and commercial banks US$ 1 million; May 5, 2023 BRB sold US$ 3 million and banks US$ 4.5 million.
- Market response and challenges
  - MID depth shallow: transaction volume US$ 7.5–18 million per day, dominated by BRB interventions.
  - Anecdotal black-market mid-ER: BIF 3650 per US$ (as of May 9, 2023) while MID’s official rate at 2818.2 BIF per US$.
  - Official ER not yet reflective of market-determined rate; restrictions on FX bureau rates and narrow ER formula center contribute to market standstill.
- Authorities’ planned corrective actions
  - Structural benchmark (SB) to complete exchange rate realignment by end-November 2023.
  - Possible measures: removal of FX bureau exchange rate band and setting a maximum buy-sell spread; give BRB full authority to implement FX-related reforms (PA by June 30, 2023); further monetary tightening (raise 7-day refinancing rate to 10 percent by June 30, 2023, grandfathering preexisting contracts).
  - Implemented corrective measures (May−June 2023) include stopping FX intervention on MID (May 15, 2023) and raising required reserve coefficient from 3 percent to 5 percent (effective May 15, 2023).
- FX intervention rule and reserves
  - BRB intervention post-unification to focus on containing excessive volatility and rebuilding buffers.
  - On May 4, 2023 BRB cancelled commitments to provide FX for FX loan repayments — total due of US$ 76.5 million in 2023; about US$ 60 million due end-August 2023 for fuel imports.
  - Program QPC: BRB should refrain from committing official reserves, including through comfort letters to the private sector.

### Monetary policy recalibration and MPF modernization
- Transition objectives
  - Move from monetary-aggregate targeting (M2) towards an inflation targeting (IT) regime with a policy rate as operational target and inflation forecasts as intermediate target.
  - EAC inflation target: 8 percent; EAMU roadmap (monetary union) setup by 2031.
- Recent and planned tightening
  - Reserve requirement increased from 3 to 5 percent (effective May 15, 2023).
  - 7-day refinancing rate raised to 10 percent (PA achieved July 3, 2023).
  - Plans to mop up liquidity and limit monetary financing: cap Treasury advances at 10 percent of total revenue of previous fiscal year (SB); discontinue publicly-guaranteed lending schemes financed by BRB while retiring existing guarantees.
- Framework modernization steps
  - Introduce policy rate and use Taylor-rule-like framework; institutionalize FPAS and strengthen communication strategy to anchor expectations.

### Financial sector status, vulnerabilities, and supervisory plans
- Banking sector key indicators (end-December 2022 unless noted)
  - Capital ratio: around 19 percent (27.1 percent at end-March 2022).
  - NPLs: 2.8 percent of gross loans at end-December 2022.
  - Liquid-assets to-total short-term commitments ratio: 16.9 percent at end-December 2022.
  - Credit to private sector: around 28 percent of GDP.
  - Net open FX positions: -6.5 percent at end-December 2022.
- Potential vulnerabilities from ER realignment
  - Indirect FX exposure via clients with foreign income or foreign-currency priced sales.
  - Foreign currency accounts risk if clients withdraw in local currency after depreciation.
  - Overdue dividend repatriation claims and foreign corporate FX liabilities may affect banks’ profitability and asset quality.
  - Lack of detailed data, financial stability assessment, and stress tests increases uncertainty.
- Supervisory and stability actions
  - BRB committed to close supervision, forward-looking framework, calibrated stress testing, frequent on-site visits, and collection of detailed data on bank FX exposures.
  - Authorities requested an FSSR to support capacity development.

### Domestic arrears clearance and FY2023/24 revenue measures
- Arrears clearance
  - Gradual repayment programmed for 2023−26 totaling BIF 485.7 billion (5.3 percent of GDP).
  - Ongoing audit of arrears to support discontinuation of arrears accumulation.
- Authorities’ estimated revenue measures impact in FY2023/24 (Measure — BIF billion — Percent of GDP)
  - Mobile messaging tax — 30.00 — 0.26
  - OTT and IP communication tax — 22.00 — 0.19
  - Specific tax on air tickets — 15.30 — 0.13
  - Levy on mobile financial services — 15.00 — 0.13
  - Apply 18 percent tax on mobile telephone units to mobile data services — 12.00 — 0.10
  - Increase anti-pollution penalties on polluting vehicles — 10.40 — 0.09
  - Annual IMEI tax on mobile terminals — 6.00 — 0.05
  - Increase fees for car registration cards and plates — 5.30 — 0.05
  - Increase specific tax on cigarettes — 5.20 — 0.05
  - Wealth tax from acquisition of third building — 2.80 — 0.02
  - Specific tax on value-added services in electronic communications — 2.40 — 0.02
  - Tax on incoming international messages — 2.00 — 0.02
  - Total — 128.4 — 1.1

### Program modalities, monitoring, and safeguards
- Program monitoring
  - Semi-annual reviews with quantitative performance criteria (QPCs), indicative targets (IT), and structural benchmarks (SB).
  - Flexibility features: asymmetric adjuster on deficit targets for windfalls; NIR floor to allow progressive buffer buildup; NIR targets adjustable for higher shock-related domestically-financed imports.
- Prior actions and structural benchmarks (selected)
  - Prior actions for ECF approval: complete special audit of NIR at end-December 2022; promulgate budget-law article giving BRB full authority to adopt FX management-related regulations; raise 7-day refinancing rate to 10 percent.
  - SB examples and timing:
    - Complete exchange rate realignment to market rate — End-November 2023 (First review).
    - Complete special audit of NIR at end-July 2023 — End-November 2023 (First review).
    - Adopt law capping Treasury advances to 10 percent of total revenues of fiscal year n-1 — End-September 2023 (First review).
    - Publish governance diagnostic assessment with action plan — End-December 2024 (Third review).
- Safeguards
  - 2022 safeguards assessment found BRB governance and control weaknesses (delays in financial statements, weak internal audit, vulnerabilities in FX/gold operations).
  - Commitments: advance safeguards recommendations; audit of stock NIR at end-July 2023 (SB); improve timeliness and quality of BRB financial reporting.

### External financing, catalytic effects, and financing gap
- External financing projections (staff)
  - Loans (Projects) — percent of GDP: 2023: 5.3; 2024: 3.4; 2025: 2.7; 2026: 1.5.
  - Grants (Projects and budget support) — percent of GDP: 2023: 14.9; 2024: 16.9; 2025: 13.1; 2026: 11.3.
  - IMF disbursement (percent of GDP): 2023: 4.1; 2024: 1.9; 2025: 1.6; 2026: 0.7.
- Program financing gap and memorandum items
  - Fiscal financing gap FY23/24: SDR 60.1 million (BIF 306 billion).
  - Raising FX reserves to 3.5 months of imports in 2023 requires US$ 444.5 million.
  - Program is described as fully financed with firm commitments for the first 12 months and good prospects for remainder.

### Risks, scenarios, and policy responses
- Upside risks
  - Stronger/faster resumption of mining exports; higher yield from revenue measures; larger-than-projected external financing due to re-engagement—grants averaged 17.7 percent of GDP per year during 2010−14 (compared to 11.6 percent projected per year during 2023−28).
- Downside risks
  - Domestic: delays in reforms; climate shocks; livestock diseases; deterioration in security.
  - External: prolonged war in Ukraine spillovers; rising global energy and food prices; weak global demand; regional security issues.
- Policy responses highlighted
  - Strengthen DRM and fiscal consolidation; proceed with ER unification and FX liberalization; tighten monetary policy; strengthen governance, PFM, SOE management; targeted social protections; calibrated capital flow measures during unification.

### Capacity development and implementation support
- Key CD priorities: ER policy and MP frameworks; financial sector stability; DRM; PFM; debt management; governance; statistics.
- National Summary Data Page launched April 2023.
- Authorities requested an FSSR and other TA to support reforms and safeguards implementation.

_International Monetary Fund — Burundi staff report excerpt (selected sections)._

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- Burundi is described as a fragile state with a history of political tensions and weak institutions; the country experienced a political and security crisis following late President Nkurunziza’s decision to run for a third term in 2015.
- Recent shocks: COVID-19, spillovers from the war in Ukraine, delayed rainfall, and outbreaks of livestock fevers (Rift-Valley fever and porcine fever).
- Debt relief and IMF support already received: Catastrophe Containment and Relief Trust (SDR 17.96 million), Rapid Credit Facility disbursement (SDR 53.9 million, 35 percent of quota), and the 2021 SDR allocation (SDR 147.6 million).
- The 2022 Article IV Consultation was completed in July 2022, the first Article IV since 2014.

### Recent developments and macroeconomic conditions
- Growth and inflation
  - Economic growth decelerated to 1.8 percent in 2022 (3.1 percent in 2021).
  - Inflation averaged 18.9 percent in 2022 and accelerated to 32.6 percent (y/y) in April 2023.
  - Food inflation: 24.5 percent in 2022 and 48.2 percent (y/y) in April 2023.
  - Domestic pump prices were adjusted by 20 percent in 2022:Q1 and transportation fees by 30 percent.
- External sector
  - Current account (CA) deficit widened to 15.6 percent of GDP in 2022 (12.4 percent of GDP in 2021).
  - Export price increases: tea 10.4 percent and coffee 48 percent.
  - Official reserves declined to US$ 160.27 million or 1.3 months of imports at end-March 2023.
  - SDR allocation use: 92.5 percent (SDR 150 million in 2022 and SDR 55 million in 2023 out of SDR 221.45 million, as of May 31, 2023).
  - Parallel FX market premium rose to 102 percent at mid-April 2023 (71 percent at end-January 2023).
- Fiscal and public debt
  - Budget FY2022/23:H1 characterized by revenue shortfall and spending overruns; fiscal deficit estimated at 5.6 percent of GDP in FY2022/23:H1 (0.8 percent of GDP in FY2021/22:H1).
  - Revenue collection: 8.4 percent of GDP at end-December 2022 (9 percent of GDP at end-December 2021).
  - Fertilizer subsidy: 3.3 percent of GDP (lump-sum prepayment covering 2022–24).
  - Central bank net lending amounted to 3.8 percent of GDP during FY2022/23:H1, including on-lending of the IMF SDR allocation (1 percent of GDP) and other ad-hoc lending for private sector financing (5.7 percent of GDP).
  - Treasury statutory advances decreased by 3 percent of GDP.
  - Public debt estimated at 68.4 percent of GDP at end-2022.
- Monetary and FX measures
  - BRB exited expansionary stance in 2022:H2: halted the 7-day refinancing window end-June 2022; suspended subsidized long-term refinancing early December 2022 (except for agricultural projects).
  - BRB initiated FX market liberalization since 2022:Q4: allowed withdrawal of remittances in foreign currency (effective October 7, 2022); transferred FX accounts of international organizations and embassies to commercial banks (end-March 2023); stopped allocating FX at the official rate except for fuel; authorized FX bureaus to apply for licenses and trade at freely determined rates from January 13, 2023 (subsequently revoked); operationalized the FX interbank market on May 4, 2023.
- Sectoral constraints
  - Fertilizer shortages due to higher global prices and limited FX availability; FOMI typically covers 90 percent of domestic demand but could not expand production quickly.
  - Major mining companies ceased production since 2021 pending contract renegotiations and mining code revision (finalized in 2023:Q1).
  - Sporadic domestic fuel shortages constrained commerce.

### Program request, modalities, and financing needs
- Authorities requested a 38-month Extended Credit Facility (ECF) arrangement with proposed access of 130 percent of quota (SDR 200.2 million).
- Program aims: address protracted balance of payments (BOP) needs, rebuild external buffers, reduce public debt vulnerabilities, catalyse donor funding, and support implementation of the 2018–27 national development plan (PND).
- Key financing and reserve targets:
  - Raising FX reserves to 3.5 months of imports would require raising FX reserves to US$ 444.5 million in 2023.
  - Fiscal financing gap estimated at SDR 60.1 million in FY23/24 (July−June).
  - Program assumes Fund disbursements would be equally used for budget financing and building FX reserves.
- Capacity and safeguards
  - Burundi’s capacity to repay (CtR) assessed as adequate but subject to elevated risks.
  - Program design is tailored to capacity constraints and includes intensified capacity development and safeguards measures (Enhanced Safeguards write-up noted in annexes).

### Program objectives and major policy pillars
- Main objectives of the 38-month ECF arrangement:
  - Reduce debt vulnerabilities and contain contingent liabilities through domestic arrears clearance and improved management of state-owned enterprises, while creating fiscal space for priority social and growth-enhancing spending.
  - Undertake FX market and exchange rate (ER) policy reform to restore external sustainability.
  - Improve monetary policy framework and foster financial sector stability.
  - Implement governance, anti-corruption, and growth-enhancing reforms consistent with the PND 2018–27.
- Macroeconomic policy recalibration to support objectives:
  - Fiscal: better-quality fiscal consolidation through higher revenue mobilization, scaled-up investment, and prudent borrowing.
  - Exchange rate and FX policy: unification of the official and parallel ER markets and FX market liberalization.
  - Monetary policy: tightening monetary policy to support unification and rein in inflation, while modernizing the monetary policy framework (MPF).
  - Structural reforms: tailored reforms attentive to financial sector vulnerabilities.
  - Intensified capacity development to support implementation.
- Staff supports the authorities’ ECF request.

### Outlook and risks
- Growth and inflation outlook
  - Growth is expected to rebound to 3.3 percent in 2023, supported by mitigating agricultural measures and FOMI’s investments to triple domestic fertilizer production financed by the subsidy prepayment received in 2022.
  - Inflation projected to remain high near term: 20.1 percent on average in 2023, with gradual receding in the medium term.
  - Private sector credit growth expected to slow.
- External and fiscal outlook
  - External imbalances expected to ease with stimulated exports, remittance inflows, and external capital inflows from donors and private investors.
  - Cumulative reforms and donor support projected to strengthen official reserves buildup to 3 months of imports by the end of the program.
- Sources of uncertainty and risks
  - Elevated risks from domestic shocks (agricultural shortfalls, livestock diseases), global commodity price shocks, policy implementation risks, and potential reversals in confidence affecting FX markets.
  - Parallel market dynamics and FX liberalization pose transitional inflationary and distributional risks, to be mitigated by monetary tightening and improved domestic food supply.

*Executive Summary prepared by IMF staff (mission: February 2−12, 2023; follow-up discussions February 22−April 6, 2023 and June 1, 2023).*

### 12. Burundi remains at high risk of external and overall debt distress; and debt is assessed

### 12. Burundi remains at high risk of external and overall debt distress; and debt is assessed as sustainable (Debt Sustainability Analysis, Text Figure 2).

### Debt assessment and key risks
- Debt assessment: Debt is assessed as sustainable per the Debt Sustainability Analysis (Text Figure 2).
- Risk classification: Burundi remains at high risk of external and overall debt distress.
- Main risks to sustainability:
  - Large stock of domestic debt and liquidity constraints to service external liabilities, with all four debt burden indicators breaching their respective thresholds under the baseline.
  - Risks related to delays in policy and structural reform implementation and uncertainty around contingent liabilities.
- Mitigating factors for external liquidity constraints and external debt service risks:
  - Strong and resilient remittances.
  - Prospects of higher grants and concessional loans.
  - Other domestic factors (para. 13).
- Note: Outstanding arrears to Libya are under negotiation and continue to be deemed away under the policy on arrears to official bilateral creditors.

### Macro outlook and selected projections (Est./Proj.)
- Real GDP growth (percent): 3.1, 1.8, 3.3, 6.0, 5.9, 5.7, 5.9, 5.5
- CPI inflation (period average): 8.3, 18.9, 20.1, 16.1, 10.1, 10.2, 10.0, 10.2
- CPI (end of period): 10.1, 26.6, 12.3, 22.4, 13.9, 12.2, 7.4, 8.1
- Revenue and grants (percent of GDP) 1/: 24.9, 26.0, 26.2, 31.1, 31.1, 28.9, 27.3, 25.3
  - Of which: Grants: 6.3, 7.2, 9.3, 15.2, 14.8, 12.1, 10.2, 8.0
- Expenditure (percent of GDP) 1/: 32.5, 33.0, 35.0, 35.6, 34.4, 31.9, 29.8, 27.7
- Fiscal balance (percent of GDP) 1/: -7.6, -7.0, -8.9, -4.5, -3.3, -3.0, -2.5, -2.4
- Public Sector debt (percent of GDP): 66.6, 68.4, 72.7, 65.8, 61.3, 56.6, 52.2, 48.0
- Broad money M2 (percent change): 22.4, 34.7, 25.9, 21.9, 15.6, 15.4, 21.7, 22.3
- Credit to private sector (percent change): 67.9, 42.8, 21.8, 23.9, 25.5, 22.3, 20.2, 16.9
- Current account (percent of GDP): -12.4, -15.6, -17.6, -18.6, -18.3, -16.3, -13.7, -11.1
- Reserves (months of imports): 2.5, 1.3, [blank], 1.9, 2.5, 2.7, 3.0, 3.4, 3.5
- External debt (percent of GDP): 20.2, 19.9, 34.4, 32.5, 30.5, 28.2, 25.4, 23.4
- Sources: Authorities; and staff projections.
- Est./Proj. notes: 1/ Fiscal year (i.e. July-June, 2023 means FY 2022/23)

### Risks to the outlook (tilted to the upside with significant downside risks)
- Upside risks:
  - Stronger or faster resumption of mining exports would significantly strengthen the BOP, boosting growth, revenue collection, and FX inflows.
  - Higher yield of programmed revenue measures would increase fiscal space for investment and improve debt dynamics.
  - Potentially larger-than-projected external financing in response to the lifted U.S. and E.U. sanctions and the program’s catalytic effects—grants averaged 17.7 percent of GDP per year during 2010−14 (compared to 11.6 percent of GDP projected per year during 2023−28).
- Downside risks:
  - Domestic: delays in implementing reforms; climate shocks potentially leading to higher food inflation and food insecurity; deterioration of the security situation; larger effects of caste diseases or their further spread.
  - External: duration and impact of external shocks; rising global energy and food prices; weak global demand; regional security issues.

### Program objectives
- Main objectives:
  - Reducing debt vulnerabilities while creating fiscal space for priority social and growth-enhancing spending.
  - Restoring external sustainability.
  - Improving the monetary policy framework (MPF) and fostering financial sector stability.
  - Implementing governance, anti-corruption, and growth-enhancing reforms.

### Policy recalibration (multi-pronged)
- Required rebalancing elements:
  - Better-quality fiscal consolidation through higher revenue, scaled-up investment, and prudent borrowing.
  - Unification of the official and parallel ER markets and FX market liberalization.
  - Tightening monetary policy in support of unification and to rein in inflation, while modernizing the MPF.
  - Growth- and governance-enhancing reforms, attentive to financial sector vulnerabilities.

### Fiscal consolidation and public debt vulnerability reduction
- Objective: Put the PV of debt to GDP on a downward path in the long term (Text Figure 2, MEFP ¶20−24).
- 2022/23 fiscal outlook and drivers:
  - Overall fiscal deficit projected to widen to 8.9 percent of GDP from 7 percent of GDP in 2021/22.
  - Revenue projected to decrease to 16.8 percent of GDP, falling short of the FY22/23 budget target of 19.6 percent of GDP.
  - Spending expected to expand to 35 percent of GDP, driven by overruns and a large fertilizer subsidy prepayment.
  - Authorities committed to containing spending in the second half of the year, including delaying new investment projects.
- 2023/24 program fiscal stance (revenue-based consolidation):
  - Revenue collection (indicative target, IT) projected to reach 15.9 percent of GDP (a 19 percent nominal increase compared to 2022/23 targets, although the deflator-driven higher nominal GDP implies a drop of 0.9 percent of GDP), supported by budget measures.
  - Spending projected at 35.6 percent of GDP.
  - Deficit projected to narrow from 8.9 to 4.5 percent of GDP—quantitative performance criterion (QPC) on primary fiscal deficit.
  - Financing: mainly domestically through Treasury deposits from the RCF disbursement, use of SDR allocation, and government security issuances.
  - Domestic arrears repayment planned for 1.5 percent of GDP, financed by Treasury deposits (RCF disbursement).
  - Draft 2023/24 budget will require investment scaling back in case of revenue collection shortfall.
- Medium-term path:
  - Deficit narrowing to 2.5 percent of GDP by 2026/27.
  - After front-loaded consolidation of 2023/24, deficit would shrink annually by about 1¼ pp of GDP, reflecting accelerated DRM, sustained budget support grants, contained current spending, prudent investment phasing, and lower interest payments from consolidation.

### Strong domestic revenue mobilization (DRM)
- Measures and administration improvements:
  - Implementation of 2022/23 and planned 2023/24 budget revenue measures, including VAT, mining, and informal sector taxation.
  - Revenue administration measures and digitalization to widen the tax base and strengthen compliance.
  - Deployment of three thousand (3000) electronic cash registers linked to the Office Burundais des Recettes (OBR) to automate transaction reporting and improve VAT administration.
  - New IT system for electronic filing and payment of all taxes expected in July 2023.
  - Phasing out current tax breaks and refraining from granting new ones is critical.
  - A CD-supported tax policy review would support preparation of a MT revenue strategy.
- Tax expenditure rationalization and monitoring to reap additional revenue and close loopholes.

### Spending priorities and safeguards
- Subsidies:
  - Containing subsidies and related contingent liabilities is critical amid high fuel and fertilizer import prices and ER unification.
  - Implicit subsidies from tax holidays on fuel products are significant (cumulative cost of about 0.7 percent of GDP, para. 9).
  - Authorities revising domestic fuel price structure to reflect cost-recovery prices.
  - Limit subsidies to gasoil temporarily if unavoidable; fertilizer subsidies operated in 2022/23 expected to cover cost for 2022–24; authorities committed to limit additional fertilizer subsidy and discontinue prepayments.
- Civil service reform:
  - Projected budgetary impact of 4.6 percent of GDP to be spread over 10 years (2023–33).
  - 2022/23 budget allocation for the reform equivalent to 0.4 percent of GDP; draft 2023/24 budget plans an allocation of 0.6 percent of GDP.
  - Reform aims to correct unexplained wage disparities and support efficient civil servant management and remuneration; includes gradual repayment of arrears due to uncompensated promotions.
- Public investment management (PIM):
  - Reinforce PIM to shift spending toward greater investment; a PIM assessment (PIMA) would improve project prioritization, planning, and execution.
- Social spending:
  - Program will monitor execution of social spending (IT) and encourage return to pre-crisis levels.
  - Freed fiscal space should finance well-targeted social safety nets (SSN); UN agencies plan to build a registry of vulnerable households to help SSN broadening and targeting.
- Deficit financing strategy:
  - Gradual switch from monetary financing towards security issuance (except for on-lending of the SDR allocation) to support ER unification and curb inflation.
  - Authorities agreed to no longer use central bank borrowing schemes to finance the deficit (QPC).

### 2023/24 Budget and Fiscal Program Targets (Percent of GDP)
- Budget vs Program:
  - Total revenue and grants: Budget 25.3, Prog. 31.1
  - Revenue: Budget 17.1, Prog. 15.9
  - Grants: Budget 8.2, Prog. 15.2
    - Program grants: Budget 2.4, Prog. 1.8
    - Project grants: Budget 5.7, Prog. 13.3
  - Total expenditure: Budget 33.4, Prog. 35.6
    - Expense: Budget 16.6, Prog. 15.9
    - Net acquisition of nonfinancial assets: Budget 16.8, Prog. 19.7
      - Of which: Domestically financed: Budget 9.3, Prog. 5.8
  - Net lending (+) / borrowing (-): Budget -8.1, Prog. -4.5
- Sources: Burundi authorities; and IMF staff estimates and projections.

### Fiscal policy, 2021–28 (selected rows, Percent of GDP)
- Total revenue and grants: 24.9, 26.0, 26.2, 31.1, 31.1, 28.9, 27.3, 25.3 (2023/24–2027/28 columns)
- Of which: Revenue: 18.5, 18.8, 16.8, 15.9, 16.3, 16.8, 17.1, 17.3
- Grants: 6.3, 7.2, 9.3, 15.2, 14.8, 12.1, 10.2, 8.0
- Total spending: 32.5, 33.0, 35.0, 35.6, 34.4, 31.9, 29.8, 27.7
- Of which: Current: 24.0, 21.6, 20.7, 15.9, 15.6, 14.9, 14.2, 14.1
- Of which: interest: 2.8, 2.8, 2.4, 2.7, 2.7, 2.4, 2.2, 2.1
- Investment: 8.5, 11.3, 14.4, 19.7, 18.8, 17.1, 15.6, 13.6
- Overall deficit, incl. Grants: -7.6, -7.0, -8.9, -4.5, -3.3, -3.0, -2.5, -2.4
- Total financing: 7.6, 7.0, 8.9, 1.8, 2.5, 2.5, 2.5, 2.4
  - Of which: Domestic (net borrowing): 9.0, 4.6, 5.5, 3.2, 2.3, 2.1, 2.2, 1.7
  - Of which: Central Bank (net) 3/: [blank], 3.5, 5.9, 3.8, 3.9, 1.3, -0.2, -0.1
  - Of which: Domestic arrears: 0.0, 0.0, -1.0, -1.5, -1.2, -0.4, 0.0, 0.0
  - Foreign: 0.4, 3.4, -0.2, -0.1, -0.5, -0.5, 0.2, 0.8
  - Accounts payable (-=repayment): 1.6, 2.8, 0.8, 0.0, 0.0, 0.0, 0.0, 0.0
  - Unidentified financing (gap): 0.0, 0.0, 0.0, 2.7, 0.9, 0.5, 0.0, 0.0
  - Of which: IMF disbursement (1/2 of ECF): 0.0, 0.0, 0.0, 2.7, 0.9, 0.5, 0.0, 0.0
- Memorandum: GDP at current market prices (BIF billion, fiscal year): 6261.7, 7291.3, 9091.1, 11434.2, 13762.2, 16153.0, 18939.8, 22173.5

### Tax expenditures and rationalization (Text Table 5)
- Composition of Tax Expenditures (Percent of GDP):
  - Government and its entities: 1.2, 0.8, 0.8, 0.5 (FY2020/21, FY2021/22, Jul 2022 - Mar 2023, FY2023/24 Budget)
  - Foreign-financed projects: 1.0, 0.8, 0.8, 0.5
  - Investors: 0.8, 0.7, 0.6, 0.0
  - Medicines and Pharmaceuticals: 0.3, 0.1, 0.1, 0.0
  - Non-profit and private organizations: 0.2, 0.1, 0.1, 0.0
  - Non-Governmental Organizations: 0.1, 0.1, 0.1, 0.0
  - Personal items: 0.01, 0.01, 0.002, 0.001
  - Senior civil servants: n.a., n.a., 0.003, n.a.
  - Other exemptions 1/: 0.01, 0.01, 0.03, 0.01
  - Total: 3.6, 2.6, 2.5, 1.2
- Authorities committed to strengthening control of exemptions in FY2023/24, including tightening procedures for granting incentives and strengthening control of the use of incentives by beneficiaries.

### Fiscal framework and transparency measures
- Steps to limit extrabudgetary spending from multi-year contracts: 2022/2023 budget Law stipulates public procurement related to current expenditure contracts should only be valid for one year.
- Structural benchmark: Prepare a report on the annual budgetary impact of multi-year contracts granted by priority ministries (social protection, defense, health, and education) by end-June 2023.
- Plan to submit to Parliament by end-December 2023 a law expanding the mandate of the Court of Auditors (Cour des Comptes) to sanction mismanagement, including commitment of extra-budgetary expenditure without prior legal authorization.
- FY2023/24 budget enhancements in transparency: new annexes on tax expenditures, non-central government entities of the General government, and state-owned enterprises (SOEs).

*Source: 1bdiea2023001 - 12. Burundi remains at high risk of external and overall debt distress; and debt is assessed as sustainable (Debt Sustainability Analysis, Text Figure 2).*

### 24. The program incorporates space for domestic arrears clearance, which will support

### 24. The program incorporates space for domestic arrears clearance, which will support

### Domestic arrears clearance and revenue measures
- A gradual repayment covering a total of BIF 485.7 billion (5.3 percent of GDP) is programmed for 2023−26.
- The ongoing audit of arrears and other measures conducive to better budget planning (para. 23) will support arrears discontinuation.
- Authorities' estimation of impact in FY2023/24 (Measure — BIF billion — Percent of GDP):
  - Introduction of a specific mobile messaging tax — 30.00 — 0.26
  - Introduction of the OTT "Over The Top" tax and IP "Internet Protocol" communication tax — 22.00 — 0.19
  - Introduction of a specific tax on the cost of air tickets — 15.30 — 0.13
  - Introduction of a specific levy on the costs of mobile financial services — 15.00 — 0.13
  - Application of the 18 percent tax on mobile telephone units to the costs of mobile data services — 12.00 — 0.10
  - Increase in anti-pollution penalties on polluting vehicles — 10.40 — 0.09
  - Introduction of a specific annual tax on IMEI “International Mobile Equipment Identity” on mobile terminals — 6.00 — 0.05
  - Increase in fees for car registration cards and plates — 5.30 — 0.05
  - Increase in the specific tax on cigarettes — 5.20 — 0.05
  - Introduction of wealth tax from the acquisition of the third bu — 2.80 — 0.02
  - Introduction of a specific tax on the costs of value-added services in the electronic communications sector — 2.40 — 0.02
  - Application of the tax on incoming international messages — 2.00 — 0.02
  - Total — 128.4 — 1.1

*Source. Authorities' estimates — Authorities' estimation of impact in FY2023/24.*

### Exchange rate unification: objectives and design
- Program envisages unification of the official and parallel ER markets in 2023 to rebalance policy amid heightened external imbalances.
- Unification entails:
  - A quantitative realignment of the official ER to reflect the market-determined rate, eliminating the parallel ER premium.
  - Adopting an ER formula as a weighted average of the ER on the previous day’s FX transactions, covering transactions between banks and between financial intermediaries (both banks and exchange bureaus) and their clients; the ER formula should be described in a legal text (e.g., regulation and circular).
  - FX market liberalization concomitant with ER realignment, including:
    - further facilitating the opening of FX bureaus;
    - further removing trade administrative constraints to eliminate FX market segmentation, while being attuned to potential adverse effects during the transition period;
    - lifting domiciliation requirements at the BRB for the remaining FX accounts;
    - setting up FX auctions with an electronic platform fostering efficient and transparent communication to the market.
  - Rebuilding FX buffers and limiting intervention to prevent excessive ER volatility and market dysfunction and avoid targeting specific ER levels.

### Recent actions and immediate effects (May 2023 and earlier)
- From 2022:Q3 the BRB tightened monetary policy, implemented FX market liberalization measures, and mostly stopped FX interventions.
- Actions taken since May 2023:
  - FX market measures: On April 28, 2023 the BRB announced the interbank FX market (MID) launch, effective May 4, 2023, with daily FX transactions between commercial banks at freely negotiated rates and auction-based BRB’s intervention. Banks allowed to collect and hold repatriated export-proceeds except for gold, coffee, and tea. MID transactions currently operated by email; an FX trading platform will automatize transactions.
  - ER formula: On May 4, 2023 the BRB announced that the official ER will be calculated as the weighted average of the previous day’s transactions on the MID and imposed a margin of +/- 2 percent around the MID rate for FX bureau and bank transactions with their clients. The measure implied an automatic official ER depreciation of about 38 percent from BIF 2081 per US$ to BIF 2875.16 per US$, substantially reducing the ER premium—estimated at around 42 percent.

- MID transactional detail examples:
  - On May 4, 2023 the BRB sold US$ 17 million and commercial banks US$ 1 million.
  - On May 5, 2023 the BRB sold US$ 3 million and banks US$ 4.5 million.
  - In comparison, in 2021 the BRB’s intervention amounted to US$ 20—60 million per month before being reduced starting 2022:Q3.

### Market response and outstanding challenges
- MID depth has been shallow with transaction volume ranging from US$ 7.5–18 million per day and dominated by the BRB’s FX interventions.
- The implied initial official ER depreciation was significantly lower than the parallel ER premium prior to the January 13, 2023 cash restriction announcement.
- Since MID launch the BRB’s computed official ER has remained mostly stable; FX bureaus’ advertised rates are lower than the ER freely quoted before May 4, 2023 due to the band around the MID rate, reducing FX supply to clients and anecdotal emergence of a black market.
  - Anecdotal evidence suggests the black-market mid-ER is BIF 3650 per US$ (as of May 9, 2023) while MID’s (official) rate was at 2818.2 BIF per US$.
- The official ER is not yet reflective of the market-determined rate; the ER formula is too narrowly centered on banks' MID transactions and restrictions on FX bureau rates persist, contributing to market standstill and reluctance of FX bureaus to sell FX previously acquired at higher rates.

### Authorities' planned measures and corrective actions
- Authorities plan to finalize the unification (SB by end-November 2023) and are committed to FX market liberalization and avoiding pitfalls of a gradual unification approach, including moral suasion.
- Envisaged near-term measures include possibly setting a maximum buy-sell spread for FX bureaus to substantially reduce FX transaction costs and formalize the parallel market; giving the central bank full authority to implement FX-related reforms (PA); and further monetary tightening.
- Text Table 6: Corrective measures in support of ER unification, May−June 2023 (selected entries):
  - Implemented corrective measures:
    - Stopped FX intervention on the MID — Improved market-driven forces on the MID — May 15, 2023.
    - Raising coefficient of required reserves from 3 percent to 5 percent — Monetary tightening to contain the ER premium and inflation — Effective May 15, 2023.
    - Launch of a new digital platform (ASYCUDA module) to improve and automate trade-related FX flow management — Improved domestic FX availability for trade, MID buoyancy, and customs revenue collection — June 2, 2023.
  - Additional planned corrective measures:
    - Promulgation, as part of the 2023/24 budget law, of an article that gives the central bank (BRB) full authority to adopt FX management-related regulations — Facilitate future FX-related reforms — June 30, 2023.
    - Removal of the FX bureau exchange rate band around the official rate and setting of a maximum buy-sell spread for FX bureaus transactions — Increased exchange rate flexibility — June 30, 2023.
    - Raising the 7-day refinancing rate to 10 percent, grandfathering preexisting contracts — Further monetary tightening to contain the ER premium and inflation — June 30, 2023.

- ASYCUDA platform expected outcomes:
  - Digitalize trade procedures and financial flows, create a unique transaction number per transaction for cross-checking, increase trade and financial flow management efficiency, verify consistency between goods flows and FX payments, and enforce the surrender requirement to improve domestic FX availability and MID buoyancy.

### FX intervention rule and reserve rebuilding
- Post-unification BRB intervention should focus on containing excessive volatility and rebuilding buffers.
- Once market restrictions are lifted, commercial banks and FX bureaus should attract export proceeds with a fair freely-quoted rate to foster MID buoyancy.
- Contingent on adequate reserves coverage, setting up a limited budget for post-unification FX intervention would ensure flexible ER management.
- In the future, the BRB should refrain from committing official reserves, including through comfort letters to the private sector; this will support MID buoyancy and protect the BRB’s net international reserves (NIR)—QPC.
  - On May 4, 2023 the BRB cancelled commitments to provide FX for FX loan repayments—a total due of US$ 76.5 million in 2023. About US$ 60 million is due at end-August 2023 for the repayment of fuel imports.

### Capital flow measures and targeted restrictions
- Burundi’s capital account is relatively open; tighter and well-calibrated restrictions on certain transactions and improved enforcement would support a sustainable and credible FX policy during unification.
- Risks include a possible rush to repatriate overdue dividends, residents’ and non-residents’ ability to open FX accounts and freely transfer abroad from these accounts, and potential amplification of FX availability challenges in the MID.
  - Individuals are free to deposit and withdraw any amount from their FX accounts, while moral entities must justify withdrawals with supportive documents (estimated cost for travel, mission, medical bills, education, and salaries).

### Monetary policy recalibration and framework modernization
- BRB’s MPF main objective is to ensure price stability (MEFP ¶42-50); the BRB uses monetary aggregates targeting as an intermediate objective with discretionary policy instruments and decisions build on MPC recommendations to adjust the monetary base to reach a targeted refinancing rate.
- The Eastern African Community (EAC) inflation target is 8 percent.
- Authorities plan to move towards an inflation targeting (IT) regime and a fully floating ER regime under the EAC Monetary Union (EAMU) scheduled to be setup by 2031.
  - Under the IT-MPF, short-term interest rates will be the operational target and inflation forecasts the intermediate target.
  - Transition has started: M2 is currently defined as an indicative intermediate target that aims to manage an interest rate target.
  - Plans include a managed floating ER regime post-unification and a shift from quantitative targeting (M2) to a Taylor rule with a forecasting model and a policy rate as key instrument to target inflation.
- Recent and planned tightening:
  - The BRB exited the COVID-19 era accommodative stance; financing granted in 2022 under the now shut-down subsidized window was large (BIF 610,134 billion at end-October).
  - BRB increased the reserve requirement rate from 3 to 5 percent and plans to increase the 7-day refinancing rate to 10 percent, grandfathering preexisting contracts (PA) with forward guidance of further interest rate increases as needed.
  - BRB plans to mop up liquidity to help rein in inflation and support MP transmission during unification.
- Monetary financing containment and MP framework strengthening:
  - Treasury advances, discontinued in 2017, started during the pandemic and were legally reinstated by the Treasury’s June 2022 Organic Law.
  - Authorities committed to capping Treasury advances to 10 percent of the total revenue of the previous fiscal year (SB) and discontinue publicly-guaranteed lending schemes to the private sector financed by the BRB while gradually retiring existing guarantees.
  - The standard 7-day refinancing rate would become the operational target and a policy rate will be introduced to complement the MPF.
  - Ultimately under an IT regime, inflation forecasts would serve as an intermediate objective guiding policy decisions.
- Communication strategy:
  - A clear communication strategy should explain past performance and deviations from the target, actions needed to align expected inflation with the target, and clearly communicate key indicators to the private sector and other stakeholders.

### Financial sector stability: status and risks
- Banking sector indicators (end-December 2022 unless noted):
  - Capital ratio (over weighed assets) declined to around 19 percent (27.1 percent at end-March 2022) but remained largely above the Basel-III norm.
  - Liquid-assets to-total short term commitments ratio at end-December 2022: 16.9 percent.
  - Credit to the private sector: around 28 percent of GDP.
  - NPLs: 2.8 percent of gross loans at end-December 2022, concentrated in trade, real estate, and transportation.
  - Liquid assets represented 21.3 percent of loans at end-December 2022.
  - Increasing large exposures accounting now for more than 100 percent of capital.
  - Net open FX positions: -6.5 percent at end-December 2022.
- Potential vulnerabilities from ER realignment:
  - Limited direct banks’ FX exposure but material indirect exposure via clients with foreign income or foreign-currency priced sales.
  - Foreign currency accounts pose a risk because clients can withdraw in local currency and banks must honor the more-depreciated post-unification official rate.
  - Foreign banks have sizeable overdue dividend repayments awaiting FX availability; liability may balloon with ER realignment and reduce banks’ profitability.
  - Foreign corporates face overdue dividend repatriation issues that might spill over to banks’ asset quality.
  - Extent of related risks is unclear due to lack of detailed data, recent financial stability assessment, and aggregate and individual stress tests.
  - Banks have started adjusting to cope with currency risks (e.g., recapitalization, increased administrative fees).

*Source: IMF staff and Burundian authorities (excerpts from provided chapter).*

### 39. The BRB is committed to fostering financial sector stability, including by

### 39. The BRB is committed to fostering financial sector stability, including by 

### Financial sector stability and supervision
- The BRB will continue close supervision and stands ready to swiftly provide necessary support to the financial sector if risks become more significant during the ER unification.
- A forward-looking supervisory framework will:
  - help detect emerging tensions,
  - include well-calibrated stress testing and frequent on-site visits,
  - assess FX-related vulnerabilities.
- Key data and capacity actions:
  - Collection of detailed data on bank FX exposures.
  - A financial sector assessment will be critical.
  - Ensuring adequate staffing of supervisory authorities.
- The authorities’ recent request for an FSSR will support CD.

### Fiscal structural reforms (MEFP ¶62-63)
- Continue the transition to program budgeting:
  - Proceed to developing an architecture of budget programs consistent with the budgetary nomenclature and compliant with the chart of accounts.
- Fast tracking digitalization:
  - Computerizing the public financial management (PFM) framework to strengthen budget execution reporting and controls, allow data sharing between institutions, and reduce fragmentation.
- Transforming the PIP into a budget programming tool to strengthen project monitoring and evaluation.
- Strengthening planning with multi-year macroeconomic and budgetary forecasts.

### Debt management (MEFP ¶37-41)
- Recent progress on reporting and coverage of public debt is commendable; further efforts needed:
  - Improve public sector coverage in the draft 2023/24 budget.
  - Broaden the 2020 and 2021 debt management reports beyond central government debt to include SOE debt and recognized domestic government arears.
- Planned improvements:
  - Improve data collection on the stock and age of pending bills and timely recording of eventual domestic arrears.
  - Improved SOE management and monitoring with mandatory annual financial and debt reporting to contain contingent liabilities.
- Report coverage notes:
  - The 2020 public debt management report covered seven SOEs out of 25 and 62 Autonomous Government Agencies (total debt of 3.3 percent of GDP at end-2020).
  - The 2023 debt report covered 24 SOEs (total debt of 16.2 percent of GDP at end-2022) and estimated government arrears at 1.3 percent of GDP at end-2022.

### Growth and fragility–reducing reforms (MEFP ¶56-58)
- Fragility and social indicators:
  - Average CPIA score of 2.9 in 2019 (below the 3.2 threshold for fragility).
  - Poverty rate at 85 percent in 2020.
- Structural constraints and vulnerabilities:
  - Large CA deficit and elevated public debt; ranked 135 out of 164 economies based on the 2020 economic risk rating by Oxford Economics.
  - Low competitiveness on utility infrastructure (access to electricity and safe drinking water).
  - Constraints in digitalization and productivity, competition, availability of collateral and credit bureaus, and skill mismatches.
  - Small industrial sector mainly construction, agricultural processing, brewing, and energy firms.
- Mitigation and reform priorities:
  - Water resource management and more climate-resistant crops.
  - Reforms to enhance human capital, health conditions, physical capital accumulation, and productivity to support the private sector.
- The program will account for these vulnerabilities (para. 46).

### Governance reforms (MEFP ¶59-61)
- Authorities will prepare a governance diagnostic report and an action plan to implement recommendations, to be published (SB by end-2024).
- Continue publishing bi-annual COVID spending reports audited by the Court of Auditors (RCF commitment); the report covering spending at end-December 2022 was published in June 2023.
- Plan to modify public bidding documents to collect information on ultimate beneficial owners of entities bidding for public contracts; may require introducing a definition of a beneficial owner within Burundi’s legal framework.
- Fast-tracked audit of 2016–21 budget execution reports; committed to timely preparing and auditing future reports (CCRT commitment).

### Program modalities — Policies and objectives
- Program priorities:
  - FX market and ER policy reform to restore external sustainability and alleviate growth bottlenecks.
  - Reducing debt vulnerabilities with fiscal consolidation driven by DRM and quality spending, containing contingent liabilities with arrear repayment, institutional improvement, and strengthened SOE management.
  - Support reform agenda to boost competitiveness and inclusive growth through structural reforms, improved governance, and high execution of budgeted social spending.
- External financing context:
  - Raising FX reserves to 3.5 months of imports in 2023 would require US$ 444.5 million.
  - Higher fiscal financing needs generated a financing gap of BIF 306 billion (SDR 60.1 million) in FY23/24.
- Implementation and catalytic effects:
  - Successful implementation expected to catalyze donor financing and improve burden sharing.
  - Half of disbursed amounts will be transferred to the Treasury for budget financing and half will remain at the BRB to support FX reserves buildup.

### Access and duration
- Staff proposes a 38-month arrangement with access of 130 percent of quota (SDR 200.2 million or US$ 266.9 million), representing about 20.4 percent of total external loans and grants in 2023, and decreasing to about 5 percent by 2026.
- Front-loaded access:
  - 30 percent of quota disbursement at the time of the ECF approval.
- Financing status:
  - The program is fully financed with firm commitments for the first 12 months and good prospects for the remainder.

### Program monitoring and flexibility
- Monitoring through semi-annual reviews with proposed quantitative performance criteria (QPCs), indicative targets (IT), and SBs (MEFP Tables 1 and 2, Appendix II).
- Flexibility features:
  - An asymmetric adjuster on deficit targets to allow spending windfall resources towards priority spending.
  - An NIR floor to allow progressive buildup of external buffers.
  - Higher-than-budgeted revenue and disbursed grants may be spent.
  - NIR targets in 2023 may be adjusted downward for higher shock-related domestically-financed imports (up to a ceiling) and for a shortfall in external inflows.
- SBs streamlined to avoid straining constrained capacity.

### Capacity development (CD)
- Arrangement will be informed by recommendations of recent CD missions and priorities in Burundi’s CD Strategy (2022 AIV SR).
- Key CD priorities: strengthening ER policy and MP frameworks, fostering financial sector stability, improving DRM, PFM, debt management, governance, and statistics.
- National Summary Data Page was launched in April 2023.

### Capacity to Repay the Fund (CtR)
- Under the baseline scenario, Burundi’s CtR to the Fund is adequate but subject to significant risks.
- Debt stock to the Fund as a share of:
  - GDP: peaks in T+2 at 9.2 percent of GDP.
  - Exports: peaks in T+2 at 69.7 percent of exports.
  - Gross international reserves: peaks in T+2 at 81.7 percent of gross international reserves.
- These exposure levels are well above the 75th percentile of past PRGT arrangements and among the PRGT’s top exposures in the last decade.
- Debt service indicators:
  - Not elevated until T+5, but sharply increase thereafter:
    - Peak at 6.2 percent of revenue and 33.6 percent of gross reserves in T+7.
    - Peak at 6.7 percent of exports in T+8.
  - Indicators of debt service to the Fund are well above the 75th percentile of past PRGT arrangements.
- Downside risks to CtR include natural disasters, deterioration in the security situation, and materialization of fiscal risks.
- Risk mitigants:
  - Authorities’ strong track record of servicing Fund obligations.
  - Steadfast implementation of the authorities’ reform agenda.
  - Prospects of higher donor support catalyzed by the Fund arrangement.

### Risks to the program
- Downside implementation risks:
  - Severe shocks and/or longer-duration shocks.
  - Delays in reform implementation.
- Mitigating measures already taken:
  - Significant reduction of monetary financing.
  - Gradual FX market liberalization starting September 2022.
  - Operationalization of the MID and initial steps to ER unification.
  - Preparation of a digital FX trading platform.

### Safeguards
- 2022 safeguards assessment found weaknesses in BRB governance arrangements and the control framework.
- Issues noted:
  - Long delays in finalizing financial statements and qualified audit opinions hamper transparency.
  - Key vulnerabilities in internal audit capacity and governance frameworks for FX management and domestic gold operations.
  - Results from the external audit of the stock of NIR at end-December 2022 (PA) point to weaknesses in accounting controls, including commitment recording.
- Commitments:
  - Authorities committed to advancing safeguards recommendations, although progress has been slow.
  - An audit of the stock NIR at end-July 2023 (SB) will be conducted to support accuracy of data reporting.

### Article VIII review
- Staff conducted a jurisdictional review of Burundi’s exchange system with regard to compliance under Article VIII, Sections 2(a), 3, and 4.
- The assessment took stock of important changes since 2015; recent significant exchange system reforms after the preliminary assessment require further analysis and will be communicated to the Executive Board once finalized.

### Staff appraisal (summary)
- Fragility and shocks:
  - Burundi faces multidimensional fragility driven by unstable political history and exacerbated by shocks (COVID-19, war in Ukraine spillovers, unfavorable weather, 2022 animal sanitary crisis).
  - These shocks slowed growth, raised commodity and domestic prices, and affected vulnerable populations.
- Recent macroeconomic performance:
  - Weak performance with sizable domestic and external imbalances: growth disappointed in 2022; inflation remains very high; large current account deficit widened; FX reserves at precarious levels; fiscal slippages and slow revenue collection; public debt high and rising.
- Authorities’ corrective measures:
  - Made state lands available to farmers, facilitated expansion of domestic fertilizer production, authorized two additional companies to import fertilizer.
  - Initial steps toward ER unification and FX market liberalization; tightened monetary policy; corrective fiscal measures in FY2022/23; ongoing measures to strengthen DRM and contain fiscal deficit and public debt.
- Program pillars:
  - (i) Front-loading fiscal consolidation to reduce debt vulnerabilities and bring external and public risks of debt distress to moderate over the medium term.
  - (ii) Implementing ER unification and FX market liberalization to restore external sustainability.
  - (iii) Tightening monetary policy, including limiting monetary financing, to contain inflationary pressures and support ER unification.
  - (iv) Implementing anti-corruption, governance and structural reforms, including stronger PFM, tighter SOE management, and other fiscal structural reforms to unlock growth and reduce fragility.
- Outlook with successful implementation:
  - Growth expected to rebound in 2023 and in the medium term.
  - Inflation projected to gradually recede with monetary tightening.
  - ER reform expected to stimulate exports and remittance inflows.
  - Cumulative effects and higher external support expected to help official reserves buildup.
  - Fiscal consolidation would put public debt on a downward trend and significantly reduce debt sustainability risks.

### Key macro-financial projections and financing (Text Table 7: Burundi: Gross Financing Needs, 2023–28)
- Table columns: 2022/23 Proj.; 2023/24 Proj.; 2024/25 Proj.; 2025/26 Proj.; 2026/27 Proj.; 2027/28 Proj.
- Gross financing needs: 14.6; 13.0; 10.7; 10.3; 10.2; 10.3
- Fiscal deficit: 8.9; 4.5; 3.3; 3.0; 2.5; 2.4
- Primary deficit: 6.4; 1.8; 0.7; 0.6; 0.3; 0.3
- Interest on debt: 2.4; 2.7; 2.7; 2.4; 2.2; 2.1
- Net acquisition of financial assets: -2.7; 1.2; -0.7; -0.8; 0.0; 0.1
- Amortization of debt: 8.5; 7.3; 8.0; 8.1; 7.7; 7.8
- Gross financing: 14.6; 10.4; 9.8; 9.8; 10.2; 10.3
- Gross domestic borrowing: 12.9; 8.8; 8.5; 8.8; 8.8; 8.3
  - of which: Central Bank: 3.8; 3.9; 1.3; -0.2; -0.2; -0.1
- Gross external borrowing: 0.9; 1.5; 1.4; 1.0; 1.4; 1.9
- Accounts Payable: 0.8; 0.0; 0.0; 0.0; 0.0; 0.0
- Financing gap: 0.0; 2.7; 0.9; 0.5; 0.0; 0.0
  - of which: IMF: 0.0; 2.7; 0.9; 0.5; 0.0; 0.0
- GDP at current market prices (BIF billion): 9091.1; 11434.2; 13762.2; 16153.0; 18939.8; 22173.5

_International Monetary Fund — Burundi staff report excerpt (selected sections)._

### 58. Staff supports the authorities’ request for a 38-month ECF arrangement with access of

### Staff supports the authorities’ request for a 38-month ECF arrangement with access of 130 percent of quota (SDR 200.2 million)

### Program approval and staff assessment
- Staff supports the authorities’ request for a 38-month ECF arrangement with access of 130 percent of quota (SDR 200.2 million).
- The Letter of Intent and Memorandum of Economic and Financial Policies set out appropriate policies to pursue the program’s objectives.
- While implementation risks are significant, they are mitigated by the authorities’ commitment to the program.

### Tentative ECF disbursement schedule and conditions
- Total amount: SDR 200.20 (130 percent of quota; Burundi's Quota is 154 million SDR).
- Disbursements and associated conditions:
  - SDR 46.20 (30 percent of quota) — Availability date: July 17, 2023 — Condition: Executive Board Approval of the three-year ECF arrangement.
  - SDR 52.36 (34 percent of quota) — Availability date: December 15, 2023 — Condition: Observance of performance criteria for July 31, 2023 and completion of first review.
  - SDR 21.56 (14 percent of quota) — Availability date: June 15, 2024 — Condition: Observance of performance criteria for December 31, 2023 and completion of second review.
  - SDR 21.56 (14 percent of quota) — Availability date: December 15, 2024 — Condition: Observance of performance criteria for June 30, 2024 and completion of third review.
  - SDR 20.02 (13 percent of quota) — Availability date: June 15, 2025 — Condition: Observance of performance criteria for December 31, 2024 and completion of fourth review.
  - SDR 20.02 (13 percent of quota) — Availability date: December 15, 2025 — Condition: Observance of performance criteria for June 30, 2025 and completion of fifth review.
  - SDR 18.48 (12 percent of quota) — Availability date: June 15, 2026 — Condition: Observance of performance criteria for December 31, 2025 and completion of sixth review.

### Key macroeconomic projections and recent developments (selected figures)
- Output, prices, and exchange rate (annual)
  - Real GDP: 2020: 0.3; 2021: 3.1; 2022: 1.8; 2023: 3.3; 2024: 6.0; 2025: 5.9; 2026: 5.7; 2027: 5.9; 2028: 5.5
  - CPI (period average): 2020: 7.3; 2021: 8.3; 2022: 18.9; 2023: 20.1; 2024: 16.1; 2025: 10.1; 2026: 10.2; 2027: 10.0; 2028: 10.2
  - CPI (end of period): 2020: 7.5; 2021: 10.1; 2022: 26.6; 2023: 12.3; 2024: 12.4; 2025: 13.9; 2026: 12.2; 2027: 7.4; 2028: 8.1
- Money and credit
  - Broad Money (M2) growth: 2020: 25.4; 2021: 22.4; 2022: 34.7; 2023: 25.9; 2024: 21.9; 2025: 15.6; 2026: 15.4; 2027: 21.7; 2028: 22.3
  - Credit to non-government sector (percent of GDP): 2020: 21.5; 2021: 67.9; 2022: 42.8; 2023: 28.1; 2024: 23.8; 2025: 25.5; 2026: 22.3; 2027: 20.2; 2028: 16.9
  - M2/GDP: 2020: 42.7; 2021: 46.7; 2022: 52.2; 2023: 51.3; 2024: 50.5; 2025: 49.7; 2026: 48.9; 2027: 50.7; 2028: 53.1

### Fiscal developments and projections (selected figures)
- Central government fiscal aggregates (percent of GDP)
  - Revenue and grants: 2020: 22.2; 2021: 24.9; 2022: 26.0; 2023: 26.2; 2024: 31.1; 2025: 31.1; 2026: 28.9; 2027: 27.3; 2028: 25.3
  - Revenue (excl. grants): 2020: 17.9; 2021: 18.5; 2022: 18.8; 2023: 16.8; 2024: 17.1; 2025: 15.9; 2026: 16.3; 2027: 16.8; 2028: 17.3
  - Expenditure (total): 2020: 28.2; 2021: 32.5; 2022: 33.0; 2023: 35.0; 2024: 35.6; 2025: 34.4; 2026: 31.9; 2027: 29.8; 2028: 27.7
  - Net acquisition of nonfinancial assets: 2020: 7.9; 2021: 8.5; 2022: 11.3; 2023: 14.4; 2024: 19.7; 2025: 18.8; 2026: 17.1; 2027: 15.6; 2028: 13.6
  - Primary balance: 2020: -3.1; 2021: -4.7; 2022: -4.2; 2023: -6.4; 2024: -1.8; 2025: -0.7; 2026: -0.6; 2027: -0.3; 2028: -0.3
  - Overall balance: 2020: -6.0; 2021: -7.6; 2022: -7.0; 2023: -8.9; 2024: -4.5; 2025: -3.3; 2026: -3.0; 2027: -2.5; 2028: -2.4
  - Fiscal deficit excluding grants: 2020: -10.3; 2021: -13.9; 2022: -14.2; 2023: -18.2; 2024: -19.7; 2025: -18.1; 2026: -15.2; 2027: -12.7; 2028: -10.4
- Public debt
  - Public gross nominal debt: 2020: 66.0; 2021: 66.6; 2022: 68.4; 2023: 72.7; 2024: 65.8; 2025: 61.3; 2026: 56.6; 2027: 52.2; 2028: 48.0
  - External public debt (percent of GDP): 2020: 17.7; 2021: 20.2; 2022: 19.9; 2023: 34.4; 2024: 32.5; 2025: 30.5; 2026: 28.2; 2027: 25.4; 2028: 23.4
  - Domestic public debt (percent of GDP): 2020: 48.2; 2021: 46.3; 2022: 48.4; 2023: 38.3; 2024: 33.3; 2025: 30.8; 2026: 28.4; 2027: 26.8; 2028: 24.7

### External sector projections (selected figures)
- Current account balance (incl. budget support), percent of GDP:
  - 2020: -10.3; 2021: -12.4; 2022: -15.6; 2023: -17.6; 2024: -18.6; 2025: -18.3; 2026: -16.3; 2027: -13.7; 2028: -11.1
- Gross international reserves (incl. ECF), US$ million:
  - 2020: 94.3; 2021: 281.0; 2022: 159.0; 2023: 239.7; 2024: 337.9; 2025: 385.1; 2026: 467.1; 2027: 545.6; 2028: 664.4
- Months of next year imports (reserves): 2020: 1.0; 2021: 2.5; 2022: 1.3; 2023: 1.9; 2024: 2.5; 2025: 2.7; 2026: 3.0; 2027: 3.4; 2028: 3.5

### Balance of payments highlights (2020–28, selected)
- Current account (US$ million): 2020: -546.8; 2021: -317.3; 2022 (pre-Covid est.): -554.7; 2023: -417.0; 2024: -610.5; 2025: -563.0; 2026: -569.3; 2027: -623.6; 2028: -618.3
- Trade balance (US$ million): 2020: -680.4; 2021: -594.8; 2022: -699.9; 2023: -723.2; 2024: -843.1; 2025: -851.2; 2026: -839.2; 2027: -865.2; 2028: -848.3
- Exports f.o.b. (US$ million): 2020: 189.6; 2021: 185.3; 2022: 201.7; 2023: 165.3; 2024: 196.2; 2025: 215.2; 2026: 280.1; 2027: 342.4; 2028: 415.2
- Imports f.o.b. (US$ million): 2020: -870.0; 2021: -780.1; 2022: -901.6; 2023: -888.5; 2024: -1,039.3; 2025: -1,066.4; 2026: -1,119.3; 2027: -1,207.6; 2028: -1,263.5

### Monetary and financial sector developments and risks
- Monetary aggregates and rates:
  - Monetary base and broad money (y-o-y percent): monetary base and broad money accelerated recently (charts indicate money supply growth has accelerated).
  - Interest rates on government securities (3, 6, 12 months): after an increase in 2021 and erratic evolution, interest rates recently initiated a decline.
  - Overnight rate: has risen reflecting the exit from accommodative monetary policy.
- Banking system soundness indicators (selected)
  - Nonperforming loans (percent of total gross loans): ranged from 5.6 to 2.6 across 2019–2022 data points, ending at 2.8 in latest series.
  - Provisions (percent of nonperforming loans): ranged from 86.9 to 46.1 in the series.
  - Capital requirement over weighted assets (solvency ratio): ranged from 21.6 down to 19.0 in the series.
  - Return on assets: range includes 4.1 down to 0.9 and up, with values such as 3.0 observed.
  - Liquid assets (percent of all loans granted): ranged and recently observed at 21.4.
  - Foreign currency exposures: foreign currency loans to total gross loans around 11.4 in latest observations; foreign currency liabilities to total liabilities around 10.5.

### Capacity to repay the Fund (selected indicators)
- Fund obligations based on existing and prospective credit (SDR million; total obligations incl. CCRT):
  - 2023: 8.9; 2024: 10.7; 2025: 8.7; 2026: 8.2; 2027: 19.0; 2028: 19.0; 2029: 40.9; 2030: 49.3; 2031: 57.2; 2032: 48.3; 2033: 48.3; 2034: 26.4; 2035: 17.9; 2036: 11.9
- Outstanding Fund credit (SDR million):
  - 2023: 155.5; 2024: 196.1; 2025: 235.6; 2026: 254.1; 2027: 243.3; 2028: 232.5; 2029: 199.9; 2030: 158.8; 2031: 109.8; 2032: 69.8; 2033: 29.7; 2034: 11.6; 2035: 1.9; 2036: 0.0
- Ratios (selected):
  - Total obligations (SDR million) as percent of exports of goods and services: 2023: 3.8 percent; 2024: 3.8 percent; 2029: 6.2 percent; 2030: 6.6 percent.
  - Outstanding Fund credit as percent of quota: 2023: 100.9 percent; 2024: 127.3 percent; 2025: 153.0 percent; 2026: 165.0 percent; 2027: 158.0 percent; 2028: 151.0 percent.

### Policy implications and implementation risks (from staff remarks)
- The program's objectives are supported by the authorities’ policy framework as set out in the Letter of Intent and Memorandum of Economic and Financial Policies.
- Implementation risks are acknowledged as significant but are judged to be mitigated by the authorities’ commitment to the program.

*Source: IMF staff estimates and projections (Burundi chapter).*

### 1. Complete a special audit of the NIR of

### 1bdiea2023001 - 1. Complete a special audit of the NIR of

### Prior actions and structural benchmarks (program conditions)
- Prior actions for ECF approval:
  - Complete a special audit of the NIR of the BRB at end-December 2022 (assets and liabilities).
  - Promulgate, as part of the 2023/24 budget Law, an article that gives the BRB full authority to adopt FX management-related regulations.
  - Raise the 7-day refinancing rate to 10 percent.
- Structural benchmarks / timing and objectives:
  - Complete the exchange rate realignment to the market exchange rate. — End-November 2023 (First review). Objective: External sector rebalancing and eliminating the parallel market premium.
  - Complete a special audit of the NIR of the BRB at end-July 2023 (assets and liabilities). — End-November 2023 (First review). Objective: Assess the end-July target.
  - Complete a study on the budgetary impact of multi-year contracts, signed prior to FY2022/23, on current spending for the ministries of education, health, defense, and social protection. — End-June 2023 (First review). Objective: Improve PFM and reduce contingent liabilities risks.
  - Adopt law capping Treasury advances to 10 percent of total revenues of fiscal year n-1. — End-September 2023 (First review). Objective: Limit monetary financing.
  - Publish a governance diagnostic assessment, including a time-bound action plan. — End-December 2024 (Third review). Objective: Improving governance and tackling corruption.

### External financing projections and key figures (staff projections)
- Loans (Projects) — Projected disbursements (staff) (In Percent of GDP):
  - 2023: 5.3
  - 2024: 3.4
  - 2025: 2.7
  - 2026: 1.5
- Multilateral (percent of GDP):
  - 2023: 4.7
  - 2024: 2.3
  - 2025: 1.7
  - 2026: 0.7
- Of which: IMF (percent of GDP):
  - 2023: 4.1
  - 2024: 1.9
  - 2025: 1.6
  - 2026: 0.7
- Other bilateral and multilateral contributors (percent of GDP examples in staff table):
  - BADEA: 2023: 0.3; 2024: 0.2; 2025: 0.0; 2026: 0.0
  - OPEC Fund: 2023: 0.3; 2024: 0.2; 2025: 0.1; 2026: 0.1
  - India / EXIM Bank of India (EBI): 2023: 0.4; 2024: 0.9; 2025: 0.8; 2026: 0.7
  - Saudi Arabia / Fonds Saoudien: 2023: 0.2; 2024: 0.2; 2025: 0.1; 2026: 0.1
- Grants (Projects and budget support) — Projected disbursements (staff) (In Percent of GDP):
  - 2023: 14.9
  - 2024: 16.9
  - 2025: 13.1
  - 2026: 11.3
- Grants by lender (percent of GDP examples):
  - IDA: 2023: 4.7; 2024: 6.6; 2025: 5.8; 2026: 4.7
  - AfDB: 2023: 1.0; 2024: 1.2; 2025: 1.1; 2026: 1.1
  - Others (incl. US and EU): 2023: 9.2; 2024: 9.1; 2025: 6.1; 2026: 5.5
- Memorandum items:
  - GDP at current market prices (In billions of US$): 3.2, 3.1, 3.4, 3.8
  - Share of IMF disbmt in total loans (in percent): 77.8, 54.7, 58.9, 43.0
  - Share of IMF disbmt in total loans and grants (in percent): 20.4, 9.3, 9.9, 5.1

*Source. Authorities and IMF staff projections. Staff projected disbursements are based on discussions between staff and the authorities and development partners and the absorption capacity.*

### Risk Assessment Matrix — main risks, likelihood, impact, and policy responses
- Conjunctural shocks and scenarios:
  - Escalation of Russia’s war in Ukraine or other regional conflicts and economic sanctions:
    - Likelihood: High
    - Expected impact on economy: High (strong negative impacts on economic activity, especially on the most vulnerable population)
    - Policy response:
      - Accelerate and strengthen discussions with donor community.
      - Promote pro-growth and pro-poor fiscal consolidation.
      - Accelerate negotiations with mining companies to brush up exports.
      - Further diversify export destinations.
  - Rising and volatile food and energy prices:
    - Likelihood: High
    - Expected impact: High (deterioration of terms of trade, shortages on food and energy products given relatively low official reserves)
    - Policy response:
      - Reform monetary and exchange rate policy.
      - Develop and strengthen domestic subsistence agriculture and food industry.
      - Build strong security stocks for energy products like fuel.
      - Strengthen public food management institutions.
  - Widespread social discontent and political instability:
    - Likelihood: High
    - Expected impact: High (disruption of economic activities, reduced investor confidence, higher fiscal pressures)
    - Policy response:
      - Support the vulnerable population with well targeted measures.
      - Use fiscal space and monetary policy prudently assuming turbulence is temporary.
  - De-anchoring of inflation expectations in the U.S. and/or advanced European economies:
    - Likelihood: Medium
    - Expected impact: High (large impact on external sector; FX critically low)
    - Policy response:
      - Increase production in subsistence agriculture.
      - Accelerate reengagement with donor community and prioritize concessional financing.
- Structural risks:
  - Deepening geopolitical fragmentation:
    - Likelihood: High
    - Expected impact: Medium (higher commodity prices could boost exports and reserves; but disorderly migration and lower confidence could raise public spending)
    - Policy response:
      - Increase fiscal space through stronger revenue administration and spending framework.
      - Increase international reserve buffers with a more flexible exchange rate.
      - Implement a more accommodative monetary policy if inflation is in check.
  - Extreme climate events:
    - Likelihood: Medium
    - Expected impact: Medium (weaker growth and exports, higher food inflation)
    - Policy response:
      - Increase fiscal space through domestic revenue mobilization and spending prioritization.
      - Support vulnerable sectors and population.
      - Tighten monetary policy to limit second-round inflationary pressures.
      - Strengthen the business environment to diversify exports.
- Domestic risks:
  - Adverse weather conditions:
    - Likelihood: Medium (Short Term)
    - Expected impact: High (lower agricultural production, slower growth, increased food inflation)
    - Policy response:
      - Guard against second-round effects on inflation.
      - Use targeted programs for vulnerable groups and reprioritize spending.
      - Promote weather-resilient agriculture (e.g., irrigation).
  - Deterioration of political and security situation:
    - Likelihood: Medium (Short to Medium Term)
    - Expected impact: Medium (disruption of economic activities; higher fiscal expenditures)
    - Policy response:
      - Allow automatic fiscal stabilizers to operate.
      - Support vulnerable population with well-targeted measures.
      - Use fiscal and monetary policy prudently if turbulence is temporary.
  - Reengagement with the international community:
    - Likelihood: High
    - Expected impact: High (increased support will ease fiscal constraints and provide FX)
    - Policy response:
      - Continue improving political and social situation; facilitate return of refugees.
      - Ensure transparency and accountability in economic policies.
      - Do not delay essential structural reforms.
  - Unification of the ER market through convergence of MID rate toward the parallel market rate:
    - Likelihood: High
    - Expected impact: High (disappearance of parallel market, boost official reserves, attract investors)
    - Policy response:
      - Allow free ER determination by the MID and remove limitations in variability.
      - Strengthen guidelines for FX bureaus.
      - Remove monetary financing of the budget.

### Enhanced Safeguards / Debt vulnerabilities (Annex II key findings)
- Composition and evolution of restructurable debt:
  - Size of de facto senior debt plus other multilateral and collateralized debt as share of total external debt:
    - Around 61 percent at program initiation.
    - Projected to rise to 77 percent over the medium term under the baseline.
  - At program initiation, debt held by institutions afforded preferred creditor status (IMF, World Bank, other major development banks) accounts for more than 30 percent of external debt; adding other multilaterals and collateralized debt brings total to 61 percent.
  - Total multilateral plus collateralized debt as a share of GDP (projected):
    - 12 percent of GDP at end-2022.
    - Peak of 23 percent of GDP at end-2024.
    - Decline to 19 percent of GDP by end-2026.
- Capacity to repay the Fund (baseline and risks):
  - Under the baseline, the stock of debt to the Fund as a share of GDP, exports or gross international reserves peaks in T+2 at:
    - 9.2 percent of GDP
    - 69.7 percent of exports
    - 81.7 percent of gross international reserves
  - Debt service indicators peak later:
    - Debt service as a share of revenue and gross international reserves peak in T+7 at 6.2 percent of revenue and 33.6 percent of gross reserves, respectively.
    - Debt service as a share of exports peaks in T+8 at 6.7 percent of exports.
  - Assessment:
    - Burundi’s capacity to repay the Fund is adequate under the baseline but subject to significant risks (natural disasters, security deterioration, fiscal risks).
    - Risks are mitigated by: authorities’ strong track record of servicing the Fund, envisaged fiscal policy measures, governance strengthening, structural reforms, prospects of stronger donor support, and smoothed phasing of Fund disbursements.
- Debt Sustainability Analysis (DSA) conclusions:
  - DSA assesses Burundi at high risk of external and overall debt distress.
  - All four external debt burden indicators breach their thresholds under the baseline, signaling high risk of external debt distress.
  - PV of public debt-to-GDP ratio under the baseline is above the benchmark in the near-to-medium term, implying high risk of overall public debt distress, though it shows a declining trend and falls below its benchmark in the medium-to-long term.
  - Despite high-risk indicators, Burundi’s debt is assessed as sustainable based on: commitment to ECF reforms (exchange rate reform, fiscal consolidation, structural and governance reforms), positive macroeconomic outlook including robust exports and GDP growth, and subject to significant risks (delays in reforms, information gaps on arrears, prolonged war in Ukraine).
  - Policy implication: Further availability of grants and concessional loans for high-return projects as donor operations scale up would be beneficial for growth and debt outlook.

### Debt decomposition (selected figures from Annex II. Table 1)
- Creditor profile (selected rows, projections/actual across years 2023–2026 as presented):
  - Total: 2640 1882 1908 1946 1976
  - External: 770 890 941 968 986
  - Multilateral creditors: 468 681 708 714 715
  - IMF: 82 207 262 314 339
  - World Bank: 122 116 110 104 98
  - ADB/AfDB/IADB: 29 ............
  - Other Multilaterals: 236 ............
  - Bilateral Creditors: 194 209 234 254 271
  - Domestic: 1870 992 966 979 990
- Memorandum items (selected, as presented):
  - Nominal GDP: 39183 19030 58341 53787
  - Multilateral and collateralized debt / Multilateral debt: 468 681 708 714 715
  - Percent of external debt (multilateral and collateralized debt): 61 77 75 74 73
  - Percent of GDP (multilateral and collateralized debt): 12 21 23 21 19
  - o/w IMF and World Bank (levels): 203 323 372 419 437
  - Percent of external debt (o/w IMF and World Bank): 26 36 39 43 44
  - Percent of GDP (o/w IMF and World Bank): 5 10 12 12 12

*Source. Authorities and IMF staff estimates and projections (Annex II, Enhanced Safeguards Write-up and related tables and risk matrix).*

### Annex III. External Sector Assessment

### Annex III. External Sector Assessment

### Overall assessment and policy responses
- Overall assessment:
  - The 2022 external position of Burundi was substantially weaker than the level implied by fundamentals and desirable policies, as per the Fund’s external balance assessment (EBA-lite).
  - Causes identified: profound distortions in the FX market; large external imbalances; foreign exchange reserves below adequacy levels (though expected to be boosted by forthcoming ECF disbursements).
  - External imbalances are projected to ease over the medium-to-long term with planned structural reforms.
- Potential policy responses:
  - FX market reforms began in 2022Q4 to close the gap with the parallel FX market by allowing market forces to drive the market.
  - Consistent monetary and growth friendly fiscal policies are needed to increase effectiveness of exchange rate policy and market reforms.
  - Reforms for financial sector resilience and soundness are essential to ensure balanced economic and social development.
  - Seeking development partners’ support to provide additional FX reserves to cushion adjustment and support an exit from fragility.

### Foreign assets and liabilities; Current Account
- Background and recent trajectory:
  - Latest NIIP estimation for Burundi dated 2018 is outdated for this assessment.
- Current Account (CA) developments:
  - CA deficit amounted to 15.6 percent of GDP in 2022 — a 25 percent increase compared to 2021 (12.4 percent of GDP).
  - The CA deficit averaged around 11.5 percent of GDP during 2017–21, lower than the 2012−2016 era average of 15.5 percent of GDP.
  - The 2017–21 lower level reflected the country’s isolation after the 2015 political crisis, which led to lower capital inflows, compressed imports, and a drawdown of reserves.
- Assessment and model adjustments:
  - The CA deficit widened to 15.6 percent of GDP in 2022 following rising import prices for capital goods, fuel, and food.
  - The CA deficit is adjusted to 15.3 percent of GDP to account mainly for cyclical contributions to the model and natural disasters from a higher level of remittances.
  - Compared to the current norm of -5.9 percent of GDP, the current account gap based on the CA model was -9.4 percent of GDP.
  - The REER index model finds a CA gap of only 10.5 percent of GDP in 2022.
  - Given limitations of the REER model, staff assess the external position to be substantially weaker than the level implied by fundamentals and desirable policies.

- EBA-lite model highlights (as presented):
  - CA-Actual-15.7
  - Cyclical contributions (from model) (-)0.5
  - COVID-19 adjustors (-)2/ -0.8
  - Natural disasters and conflicts (-) -0.1
  - Adjusted CA-15.3
  - CA Norm (from model)3/ -5.9
  - Adjusted CA Norm-5.9
  - CA Gap-9.4-1.4
  - o/w Relative policy gap-2.7
  - Elasticity-0.1
  - REER Gap (in percent) 71.6 10.5
  - (Notes indicate use of EBA-lite 3.0 methodology and caveats related to data limitations for compensation of employees and NIIP.)

### Real Exchange Rate (REER)
- Background:
  - The real effective exchange rate appreciated by around 32 percent in 2022, mainly due to higher inflation over the prior 12 months (26.6 percent) compared to trading partners.
- Assessment:
  - Estimates of the REER gap range around 71.6 percent (CA model), indicating a large overvaluation and a severe REER misalignment.

### Capital and Financial Accounts; FX intervention and reserves
- Capital and financial accounts:
  - In 2022, Burundi’s CA deficit was largely financed by external inflows.
  - In 2022, financial and capital accounts receded due to higher financial liabilities.
  - Direct investment in 2022 was 0.2 percent of GDP.
  - Over the medium term, direct investment inflows are projected to increase, supported by projects and reforms under the National Development Plan (NDP).
  - Projected ECF disbursement and donor support are expected to provide a significant buffer to the financial account and help significantly improve FX coverage.
  - Planned reforms (ER policy, FX market and monetary policy) would improve the financial account and attract more private flows.
  - Improving frequency and quality of financial account data provision, notably on foreign investments and trade credits, is recommended.
- FX reserves and adequacy:
  - Foreign exchange reserve coverage declined to 1.3 months of prospective imports at end-December 2022 after reaching 2.5 months of imports at end-December 2021.
  - SDR allocation (SDR147.6 million) represented around 0.14 month of imports; RCF disbursement (SDR 53,9 million) represented around 0.053 month of imports.
  - Burundi’s reserve coverage was below 3.5 months of goods and services imports, the adequate level from the country’s ARA-CC model.
  - Assessment: FX reserve coverage was below adequate levels; ARA metric should be regarded as a lower bound given Burundi’s structural characteristics (commodity intensive economy, vulnerability to terms-of-trade shocks).
  - Largest share of the country’s debt is domestic: 48.4 percent of GDP (domestic) versus 19.9 percent of GDP (external) in 2022 — a mitigating factor on the impact of low reserves.

### Annex IV — What drives inflation: summary of findings
- Context:
  - Inflation in Burundi has been volatile and trending upward since 2019, with negative values in 2018–2019 and two-digit values starting in 2022.
  - Price increases were influenced by global drivers (food and energy prices, spillovers from the war in Ukraine) and Burundi-specific shocks (effects of climate change on agriculture; Rift-valley fever; porcine fever; suspension of most mining contracts since 2021; parallel exchange rate market distortions).
  - Parallel ER market premium exceeded 100 percent before creation of the MID (Marché Inter-bancaire des Devises).
- Main drivers of recent price increases:
  - Food items, housing, transportation, and energy have been the main drivers.
  - Food prices have been the main driver over years due to irregular rain patterns and limited import capacity.
  - Contributions to inflation of housing, gas and energy products increased over the years.
  - In 2021, health items contributed more to inflation after food because of increased Covid-related imports.
  - In 2022, contributions of food, furniture, transportation, housing, and energy products (including fuel) all increased due to rising international prices from the war in Ukraine.
  - Limited foreign exchange and excess demand contributed to development of parallel markets for fuel, fertilizers, sugar, and cement; parallel market prices are captured only in part in the CPI.
- Empirical decomposition: imported versus non-imported contributions (Jan–Dec 2022)
  - Imported goods and services (weight 42.0 percent): contribution 7.9 percent
    - Food: weight 19.6 percent; contribution 4.8 percent
    - Clothes and shoes: weight 5.7 percent; contribution 0.7 percent
    - Housing, Gas Electricity and fuel: weight 8.0 percent; contribution 0.8 percent
    - Health: weight 2.8 percent; contribution 0.4 percent
    - Transportation: weight 5.9 percent; contribution 1.2 percent
  - Non imported goods and services (weight 58.0 percent): contribution 11.1 percent
    - Food, locally produced: weight 33.0 percent; contribution 8.1 percent
    - Other, non imported: weight 25.0 percent; contribution 2.9 percent
  - Overall: 1.0 (weight?) and 18.9 percent average inflation in 2022 (table shows Overall 1.0 18.9)
- Interpretation:
  - Imported goods account for a significant part of inflation (imported goods contributed 7.85 percent of the 18.9 percent average inflation in 2022; non-imported goods contributed 11.05 percent).
  - Imported inflation may be related to domestic imbalances (for example, an overly expansionary monetary policy), creating excess demand for domestic and imported goods.

### Annex IV — Monetary influence on inflation: regression results
- Model specification:
  - Dependent variable: ΔCPI (year-over-year change)
  - Regressors included (initially): lagged ΔCPI-12, ΔM2, official ER, parallel ER premium.
  - Due to strong collinearity between M2 and the official ER, the official ER was removed and M2 kept to measure monetary stance.
  - Estimated on monthly data January 2017–December 2022 using OLS.
- Key empirical findings:
  - ΔM2 is a significant factor of inflation.
  - Δparallel ER premium was not significant in the regression.
  - Interpretation offered: although 80 percent of ER transactions occur on the parallel market, a smaller share is used for imports; hence the parallel market premium’s weak statistically measured effect on CPI.
- Regression table highlights (Text Table 2):
  - Intercept: 117.83 (Std Error 32.17) t Ratio 3.65 Prob<.0001*
  - ΔCPI-12: 2.28 (Std Error 0.92) t Ratio 2.45 Prob 0.0168
  - Δpara. ER: -0.0035 (Std Error 0.021) t Ratio -0.16 Prob 0.8706
  - ΔM2: 0.1102 (Std Error 0.031) t Ratio 3.45 Prob 0.0010*
  - R-square = 0.20; Prob>F = 0.0013*
- Diagnostics:
  - Model shows a relatively weak R-Square but error terms are described as independent, homoscedastic, and normally distributed according to the authors’ diagnostics (Text Table 3).

### Annex V — Overview of the agricultural sector: structure and government actions
- Agricultural calendar and production shares:
  - Year comprises three seasons: A, B and C.
    - Season A: October (previous year) to February (current year); contributes 35 percent of total annual agricultural production; mainly maize and beans.
    - Season B: main season, brings 50 percent of production; mainly maize, beans, and sorghum.
    - Season C: follows season B and is largely farmed in swamps; contributes 15 percent of total production; largely dedicated to vegetables.
  - Seasonal lean periods: March to May and mid-September to December, when households face high food prices.
  - Subsistence agriculture represents about 27 percent of GDP and employs around 70 percent of the workforce.
  - Around 60 percent of the population possess small plots in marshlands where season C production provides food for two to three weeks.
- Fertilizers:
  - Fertilizers are high priority; both export agriculture (coffee, tea) and subsistence agriculture depend on rainfalls and fertilizers.
  - FOMI (Fertilisants Organaux-Mineraux), created in 2019 by two importers, supplies domestic fertilizers composed of 50 percent domestic organic manure and 50 percent imported mineral substances; composition considered more adequate to subsistence agriculture and soil sustainability.
  - FOMI is main supplier through Ministry of Agriculture offices.
  - Fertilizers classified as priority inputs and subsidized by 70 percent by government budget — farmers pay 30 percent of price per bag of FOMI fertilizers.
  - NPK fertilizers for export crops are fully imported; FOMI does not produce them yet.
- Fertilizer sector expansion and supply measures:
  - Demand for fertilizers increasing due to government measures encouraging larger farms, promotion of cooperatives, allowing civil servants to have farms, and facilitating financial access via lower-interest credit for agriculture (BRB).
  - FOMI is extending factories: one new factory in Bujumbura and two almost finalized in the South; a new fertilizer firm authorized in Gitega.
  - AFDB pledged to donate 2 years of supply of fertilizers to help avoid shortages.
- Government efforts and challenges:
  - Agriculture is priority sector in government action plan.
  - Government subsidizes fertilizers by 70 percent, establishes preferential interest rates for banks and micro-financial institutions via BRB refinancing window, organizes sector distribution through the Ministry of Agriculture, and provides public lands to cooperatives and investors to encourage farm extension.
  - ISABU (agronomic research institute) distributes improved quality seeds to farmers.

*Source: 1bdiea2023001 - Annex III. External Sector Assessment.*

### 6. Adaption to climate change remains the main challenge for the Burundian agricultural

### 6. Adaption to climate change remains the main challenge for the Burundian agricultural sector

### Agriculture and climate vulnerability
- The Burundian agriculture is mostly a rain-fed agriculture and is highly dependent on the variability and intensity of rains.
- Agricultural production has fluctuated a lot owing to climate conditions in recent years.
- Production in the primary sector declined by 1.8 percent in 2022 due to delayed and insufficient rainfalls at the end of the year affecting the production of seasons C and A and raising concerns about food security in certain parts of the country.
- Government efforts to adapt agriculture to climate change through the promotion of irrigation agriculture and climate-resistant seeds are described as still insufficient to mitigate the effects of weather conditions on the sector.

### Monetary and financial sector recent measures and unwind of accommodation
- The BRB engaged in policies supporting the economy through liquidity provision to the financial sector and direct support to the treasury in response to shocks including the covid-19 pandemic; it is now progressively unwinding these measures.
- Reserve requirement ratio increased from 3 to 5 percent (decision on April 4; effective on May 15).
- The 7-day refinancing window, which accounted for around 90 percent of total refinancing provided by the BRB, was put on hold since June 2022 amid inflation pressure and over-liquidity.
- Eligibility to the refinancing window to priority sectors was narrowed; the subsidized refinancing at 2 percent with a maximum lending rate of 8 percent was stopped on December 9, 2022, except for agricultural products.
- Commercial banks’ use of the interbank market rose: refinancing flows in the interbank market increased by 76.8 percent in November 2022 compared to November 2021.

### Foreign exchange market reforms and liberalization
- Since October 2022, the BRB initiated reforms to lift restrictions, allow greater private sector involvement, and limit distortions in FX market operations.
- Remittances can be withdrawn in hard currency; remittance credits increased by almost 529 percent between October and December 2022 (authorities’ data as of December 9, 2022).
- FX bureaus were authorized to resume activities and trade at market rate—measure subsequently revoked on May 4, 2023.
- The BRB removed multiple margins in FX operations and replaced them with a unique maximum rate of 5 percent for commercial banks.
- On April 28 the BRB announced the launch of the Interbank FX market (MID); from May 4 the official exchange rate would be determined by trades between commercial banks through the MID and the BRB stopped providing FX to the private sector except for fuel and medicines (provisions subsequently relaxed).
- BRB ended all comfort letters and lifted other restrictions on FX surrendering requirements; guarantees on private FX loans from commercial banks were abrogated (US$ 76.5 million was due in 2023).
- Given petroleum sensitivity, the BRB maintained comfort letters for fuel with a payment of US$ 60 million due end-August 2023.
- Surrender requirement for export proceeds lifted except for coffee, tea, and mining products.
- MID intervention and participant rules: BRB FX intervention allocated on a best-bid-first-served auction basis; if a commercial bank’s positive open net global position in FX is above 25 percent of equity it must sell the excess the following day; symmetrically, banks must buy FX if their open net global position in FX is negative and above 25 percent (in absolute value) of total equity.
- Open net global position in FX is defined as the difference between assets and liabilities in FX.

### Channels and approaches to exchange rate (ER) unification
- Two ER unification strategies identified: instant unification and gradual unification.
- Instant unification: simultaneous adjustment and de-segmentation of the two ER markets; banks would finance most current operations, purchase foreign currency from customers at freely negotiated rates, and the official rate replaced by a reference rate calculated as the weighted average of banks’ transactions with customers; the calculation formula and underlying data should be published.
- Gradual unification: incremental adjustment followed by de-segmentation; replace the formula for the official ER with a weighted average of bank-customer transactions while retaining priority allocation and surrender to the BRB initially; publication of formula and data recommended.
- An ER adjustment period of more than six months is not advisable as pressures to not fully complete the reform would mount.
- The current MID formula (as defined by authorities in the May 4 communique on the first day of the MID) calculated the ER as the weighted average of transactions in the MID; minor fluctuation in the ER and a premium (40 percent) persist; the formula and underlying data have yet to be published.
- Recent BRB measures capped margins on FX operations at 2 percent (and 5 percent when all fees and costs are included).

### Expected macroeconomic effects and policy levers for unification
- Unification may not necessarily heighten inflation: more than 60 percent of imports are financed in the parallel market and a significant portion of adjustment has been already passed to consumers.
- It is estimated that inflation would rise to 5 or 6 percent above the baseline scenario upon unification completion (MCM TA).
- An increase in the interest rate (7-day refinancing rate) of 6-7 percentage points would be enough to contain the inflation uptick.
- Unification will reallocate the cost of subsidizing regulated products from the BRB to the fiscal authorities; importers of price-controlled goods will buy currency in the market and any losses on resale prices will be borne by the budget.
- Unification will increase tax revenues (for example due to valuation of imports by customs at the unified rate) but will also increase debt service, albeit in a limited way due to the relatively low stock of external debt.
- Expected benefits: reduce macroeconomic imbalances; improve competitiveness, investment, remittance inflows, and growth; eliminate an implicit tax on exports and an untargeted subsidy for certain imports.
- Reforms and external support projected to support official reserves buildup to 3.7 months of imports by the end 2026.
- With ER unification the BRB would participate in the FX market only through auctions and when necessary to build reserves or smooth excessive volatility; BRB must establish and communicate its interaction strategy and set a limited FX intervention budget.

### Key revenue and tax measures in recent budget laws (selected highlights)
- 2023/24 Budget Law:
  - Strengthening of VAT reimbursement controls tied to an electronic invoice in the EBMS.
  - New service consumption tax on hotels: 5 percent, payable monthly by hotels and collected from clients.
  - New tax on financial services: 8 percent on the gross amount of interest, agios, commissions and other remuneration; not deductible from taxable income; VAT on financial services abolished; specific 5 percent contribution payable by financial institutions abolished.
  - Natural persons with businesses taxed similarly to companies: those with annual turnover less than or equal to BIF 25,000,000 required to subscribe to quarterly tax declaration at a single rate of 0.3 percent of quarterly turnover; individuals with annual turnover of more than twenty-five million (25,000,000) must file an annual income tax declaration.
  - Increase in discharge tax for some businesses (butchers, trucks of more than 10 tons).
  - Revenue from renting government stands and shops to be transferred to OBR accounts with government giving 10 percent back to local governments.
  - Increase in fee for canceling or modifying a customs declaration.
  - New annual fee for importer/exporter code: BIF 50,000.
  - New fees for licenses to operate beverage outlets.
  - New fee of BIF 10,000 for printing a duplicate payment receipt or tax registration certificate when requested by beneficiary.
  - Specific tax on cigarettes increased.
  - New taxes on building permits, plane tickets, mobile messaging, internet protocol (IP) communication, mobile financial services, services in the electronic communication sector.
  - New wealth tax introduced from acquisition of the third building.
  - New fee on registration, renewal or transfer of mortgage relating to immovable property.
  - Cost of Health Assistance Cards (CAM) unified to BIF 3000.
  - Cost of tax stamp set in BIF equivalent to BIF 576.

- 2022/23 Budget Law:
  - VAT deduction or reimbursement conditional on verification of VAT payment by supplier.
  - Eliminated exemptions from taxation except those in laws, international conventions, ratified treaties and international contracts.
  - VAT applied to delivery of buildings or fractions with undefined use under conditions defined by law.
  - Increase in annual flat-rate road charge for some vehicles and machinery.
  - Increase in fee for cancellation/modification of customs declarations when fault lies with customs agency.
  - Ad valorem tax of 1.5 percent of customs value instituted on all imports except exempted items.
  - Annual fee for renewal of temporary admissions for vehicles, motorcycles or items under temporary admission regime.
  - Increase in fee related to national driving licenses.
  - New special contribution of five percent (5 percent) of customs value for some vehicles; another special contribution of five percent (5 percent) of acquisition value for buildings with market value ≥ five hundred million Burundian francs.
  - Fifteen percent (15 percent) withholding applied to some payments made by residents, including tax-exempt persons.
  - Increase in levy paid for customs declaration except simplified declarations.
  - Flat-rate levy on income earned by intermediaries in mobile money transfer operations.
  - Tax of ten percent (10 percent) applied on rates charged by notaries and lawyers on behalf of the Treasury.
  - Increase in ad valorem tax rate on vehicles (exceptions specified); increase in specific tax rates on beer, liquors, wines of all categories, and lubricants.
  - Specific taxation system on cigarettes containing tobacco replacing ad-valorem system for consumption tax calculation.

- 2021/22 Budget Law (selected):
  - New tax on mobile phone megabits: 18 percent of the cost.
  - Non-exemption from income tax and VAT on sales made by companies.
  - New anti-pollution tax on imported used vehicles.
  - New road fee introduced.
  - Rental tax base widened to include land leases.
  - Strengthening of tax collection from mining sector activities.
  - Strict enforcement of dividend collection from public enterprises.

*Source: IMF staff summary of chapter 6 and annexes from the provided PDF content.*

### Annex IX. Key Areas of Reform in Revenue Administration

### Annex IX. Key Areas of Reform in Revenue Administration

### Revenue Administration Measures
- Enhancing the management of activities and computerization:
  - Modernize the management of reforms and services by modernizing the methods of evaluating the activities of the OBR, developing and automating dashboards, rethinking the role of leaders in relation to the activities of the office, developing a computer performance management module and strengthening statistical analysis capabilities.
  - Develop a digitalization plan adapted to the strategic objectives of the OBR.
  - Revitalize the governance and management of IT projects.
  - Secure the operationalization of tax management system ITAS.
  - Anticipate the impact of computerization on the OBR by carrying out without delay a study of the impact of the digital transformation on the organization and the number and profile of the OBR agents.
- Strengthening tax operations:
  - Make the taxpayer registry more reliable and expand it by enhancing tax information by updating taxpayer register information, publishing active tax identification numbers (TINs) and leveraging third party data sources.
  - Improve the sincerity of declarations by implementing a tax control strategy based on risk management and strengthening spot checks on significant risks (loans, nil, exemptions).
  - Strengthen recovery action to reduce the stock of tax arears and limit their increase by immediately engaging in a management dialogue on declarations not followed by payment and implementing all the coercive actions provided for by the regulations.
  - Promote voluntary consent to tax by simplifying and modernizing reporting and payment procedures to facilitate tax obligations and reduce their cost, and simplifying the tax system for micro and small taxpayers.
  - Statistic: The number of taxpayers increased by 45 percent to 30,402 from FY2020 to FY2021 and further by 13 percent to 34,311 in FY2022 and could be further increased.
- Strengthening customs operations:
  - Improve the risk management system by establishing the "risk analysis" unit of the customs and e-business services department as the only structure in charge of customs risk management, drawing up a roadmap for the "risk analysis" unit and strengthening the human and material resources of the unit.
  - Activate the litigation management module.
  - Set up an updated and dynamic database listing for the main revenue-generating products.
  - Strengthen the control of exemptions by bringing together under the responsibility of a single department all the activities for monitoring exemptions and by increasing the staff dedicated to the control of this function.
  - Improve controls by aligning current customs procedures with Single Customs Territory (SCT) guiding principles, bringing together the various services in charge of handling, customs clearance and monitoring of manifests, modernizing the management of warehouses and temporary storage areas (MADT), automating warehouse plan management, and expediting checks for the duration of the temporary regime and strengthening the means of the surveillance department.

### Tax Policy Measures
- Rationalize tax expenditures and exemptions:
  - Most exemptions in FY2021/22 were distributed as follows: VAT (65.1 percent), customs duties (18.5 percent), consumption tax on sugar (6.3 percent), excises (3.3 percent) and specific tax on fuel (3.3 percent).
  - Exemptions are largely driven by government and automatic exemptions for donor and NGO activities; exemptions for private investors are also large.
  - Authorities’ ongoing analysis of tax exemption categories and impact on investment is noted; a tax system review could help close loopholes.
  - Reporting of tax exemptions in the budget execution reports (submitted to Parliament) would strengthen accountability.

### Spending Rationalization Measures (selected highlights)
- Implement the authorities’ public investment program (PIP) while reinforcing public investment efficiency; remainder of SDR allocation mostly devoted to financing a railway.
- Protect well-targeted social safety nets (SSN); use some expected higher fiscal space for appropriately targeted social programs and mitigation measures for food and fuel price shocks.
- Contain the wage bill increase linked to civil service reform:
  - 2020/21, 2021/22 2022/23 and 2023/24 budget laws froze hiring in all public sectors except defense and security, education, health, and the revenue administration starting July 1, 2021.
  - Adopted a “fair wage policy” to reduce wage disparities; payment of wage arrears due to uncompensated promotions over the last five years (4.6 percent of GDP) are expected to be repaid over 10 years (2023-33).
  - Note: initial budgeted increase of 0.5 percent of GDP in 2021/22 (salary increase of previously discriminated civil servants).
- Contain subsidies, especially for fuel and fertilizers:
  - Cumulative cost of tax holidays on fuel products implemented since October 2021 is about 0.7 percent of GDP.
  - Resulting currency mismatches between private companies’ liabilities (in US dollars) and the domestic value of imported fuel indexed on an overvalued ER are estimated from 3 to 6 percent of GDP per year.
  - Prepayment of fertilizer subsidies operated in 2022/23 will cover the cost for 2022—24; prepayment approach should be totally discontinued.
  - The AfDB’s pledge to supply two years of subsidies will be helpful.
  - Fertilizer subsidies should continue to be targeted at small farmers and the vulnerable population to contain cost and limit leakages to neighboring countries.
- Avoid extrabudgetary spending and ensure gradual repayment of pending bills accumulated during the pandemic; previous budget laws introduced multi-year procurement and payment plans to strengthen investment management.

### Possible Public Financial Management (PFM) Measures
- Transparency and publication on the MFBPE website:
  - Develop and publish a performance monitoring framework for the revenue administration updated quarterly.
  - Prepare and publish a roadmap of actions taken and planned for the implementation of key recommendations of the RA CD mission.
  - After IMF CD review of the tax system, start preparing and publishing quarterly tax expenditure reports; prepare tax expenditure reports for each fiscal year including the tax exemption policy and an assessment of its efficiency, to be published on the MFBPE website and annexed to draft budget review laws submitted to parliament.
  - Develop and publish quarterly budget execution reports that include analysis of amounts spent and outcomes achieved, including on social and capital spending.
  - Prepare and publish roadmaps for successful implementation of program budgeting, computerization of the PFM framework, and key recommendations of the PFM CD mission.
- Specific PFM actions to prepare and publish roadmaps for implementation include:
  - Establish a reform monitoring unit.
  - Finalize the audit of the financial information systems of the Ministry of Finance.
  - Conduct a census and audit of budgetary and extrabudgetary arrears.
  - Conduct an inventory of guarantees granted.
  - Conduct a census of public enterprises.
  - Develop an annual, monthly, rolling cash flow plan.
  - Adopt an orderly and integrated budget calendar consistent with the work of the macroeconomic framework process, CBMT/MTEF, PIP, and budget preparation.

*Source: Annex IX, "Key Areas of Reform in Revenue Administration," and related annexes, as provided in the supplied IMF content unit.*

### 1.      This memorandum describes the macroeconomic and financial policies that the

### 1bdiea2023001 - 1.      This memorandum describes the macroeconomic and financial policies that the

### Program objectives and scope
- 38-month Extended Credit Facility (ECF) supported program (2023-2026) requested from the International Monetary Fund (IMF).
- Program focus: maintaining macroeconomic and financial stability to help reduce vulnerabilities to external shocks.
- Main objectives:
  - (i) improving public financial management to increase fiscal space and promote investment in pro-growth sectors and reduce debt vulnerability,
  - (ii) modernizing the monetary policy framework and restoring external sustainability through a more flexible exchange rate management,
  - (iii) promoting financial sector stability, and
  - (iv) implementing governance and anti-corruption reforms for sustainable and inclusive growth.
- Alignment: National Development Plan (NDP, 2018—2027) and East African Community macroeconomic convergence criteria:
  - (i) overall fiscal deficit (including grants) to GDP ratio below 3 percent,
  - (ii) public debt-to-GDP ratio of no more than 50 percent,
  - (iii) inflation rate of no more than 8 percent, and
  - (iv) FX reserves of at least 4.5 months of imports.

### A. Recent macroeconomic developments — key findings
- Growth and inflation:
  - Real GDP growth estimated at 1.8 percent in 2022 (down from 3.1 percent in 2021).
  - Inflation averaged 18.9 percent annually in 2022 compared to 8.3 percent in 2021; upward trend since February 2022, driven mainly by higher global oil and food prices.
- Fiscal position and public debt:
  - Overall fiscal deficit (cash basis) for fiscal year 2021/2022: BIF 510.2 billion (compared to BIF 474.0 billion for the previous year).
  - Total revenue for 2021/2022: BIF 1,372.7 billion.
  - Total public expenditure estimated at BIF 2,404.5 billion.
  - Total public debt at end 2022: BIF 5,410.5 billion.
    - Domestic public debt: BIF 3,859.2 billion.
    - External public debt: BIF 1,551.3 billion.
- External sector and reserves:
  - Average current account deficit over 2019-2022: USD 423.3 million billion (12.5 percent of GDP).
  - Current account deficit increased from USD 417.0 million in 2021 (12.4 percent of GDP) to 610.5 million in 2022 (15.6 percent of GDP).
  - Official reserves increased from 0.8 to 3.0 months of imports from end-June 2021 to end-December 2021, then dropped to 1.5 at end-December 2022.
  - FX reserve reduction partly due to external imbalances driven by an overvalued exchange rate (ER) in real terms and central bank FX interventions to meet rising fuel and food import bills.
- FX market and parallel market:
  - Growing parallel market with a high premium compared to the official market.
  - Causes: withdrawal of development partners post-2015, increased import requirements, demand exceeding supply, creation of currency rationing system for strategic import products.
  - Reforms (e.g., FX interbank market launch) have narrowed the FX market spread, but parallel market premium continues to rise.
- Monetary policy and liquidity:
  - BRB applied accommodative monetary policy until June 2022:
    - Monetary base increased by 29.9 percent from June 2021 to June 2022.
    - Money supply increased by 20.8 percent from June 2021 to June 2022.
    - Credit to the economy increased by 81.7 percent from June 2021 to June 2022, largely due to BRB refinancing of pro-growth sectors since October 2019.
  - Monetary tightening starting July 2022:
    - Refinancing window for priority sectors suspended from December 9, 2022, except for the agro-pastoral sector.
    - Refinancing for these sectors prior to suspension: BIF 530.8 billion.
    - Monetary base declined by -14.6 percent between July and December 2022.
    - Effective May 15, 2023, reserve requirement ratio revised from 3 to 5 percent.
- FX and payments reforms:
  - Since October 2022, BRB authorized reopening of bureaux de change and lifted restrictions on instant currency transfers.
  - Multiple exchange margins eliminated and replaced by a single margin of 2 percent around the official rate.
  - Measures to reduce cash and encourage electronic payments included withdrawal and payment daily/monthly caps (described in para. 13) though later some caps were cancelled.
  - Effective May 4, 2023, official ER level determined by commercial bank transactions through the Forex Interbank market (MID - Marché Interbancaire des Devises).
  - BRB discontinued provision of FX to private sectors (except fuel imports) and instructed needs be directed to commercial banks or FX bureaus (limited to US$ 5000 per person)—restriction later made not compulsory.
  - BRB revoked comfort letters guaranteeing provision of FX to repay private sector external liabilities coming due and allowed commercial banks to collect and hold repatriated proceeds for some exports (except coffee, tea, and mining products).
  - BRB cancelled previous measures limiting cash transactions described in para. 13.
- Financial sector indicators:
  - Overall solvency ratio: 25.5 percent at end-June 2022 (minimum required: 14.5 percent).
  - Baseline solvency ratio: 24.0 percent at end-June 2022 (compared to 12.5 percent rule).
  - Non-performing loans: 2.5 percent of total loans through end-June 2022.

### B. Macroeconomic outlook — projections and expectations
- Growth:
  - Real GDP growth estimated at 1.8 percent in 2022 and expected to gradually strengthen in 2023 and in the medium term.
  - Drivers: implementation of the NDP via modernization and diversification in agriculture and livestock, mining sector revitalization, increased and improved energy supply, and tertiary sector development.
- External balance:
  - Balance of payments to continue showing a current account deficit due to financing of investment projects that will increase imports.
  - Imports expected to continue exceeding exports due to increased imports of producer goods including petroleum products and capital goods for NDP projects (e.g., construction of the railway and hydroelectric dams).
  - Exports expected to increase with revitalization of the mining sector following the new mining code.
- FX market distortions:
  - BRB reforms aimed at unifying the official exchange rate and the parallel market exchange rate and liberalizing the foreign exchange market; distortions expected to be resolved in the near term.
- FX reserves:
  - Actions to improve the level of FX reserves will be taken, including encouraging investment in export-oriented and import-substitution sectors.

### C. Macroeconomic and financial policies under the program — fiscal policy highlights
- Fiscal consolidation strategy:
  - Government committed to gradual fiscal consolidation through accelerated revenue collection and prudent fiscal policy.
  - Short-term fiscal projection: overall fiscal deficit for fiscal year 2022/23 could widen to around BIF 806 billion (8.9 percent of GDP).
  - Revenue mobilization expected: BIF 1,530.3 billion (from tax and non-tax measures in 2021/22 and 2022/23 budgets).
  - Fiscal expenditure expected: BIF 3,185.3 billion, including project grants BIF 849.1 billion and fertilizer subsidies BIF 300 billion (para. 27).
  - Medium-term: fiscal balance expected to improve by more than 5.9 percent of GDP to settle below the regional convergence criterion.
- Budget discipline and safeguards:
  - Draft budget for 2023/24 takes program objectives into account; will help achieve programmed fiscal primary deficit targets (quantitative performance criterion, QPC, Table 2).
  - Spending beyond budget allocations prohibited and may be sanctioned.
  - Minister in charge of Finance empowered to block commitment of "non-fixed" expenditure in event of revenue shortfalls.
  - Government will limit spending if needed to remain within the fiscal primary balance target envisaged in the program.
- Revenue mobilization measures:
  - Commit to reaching minimal levels of domestic revenue collection or revenue floors (indicative target, IT, Table 2).
  - Goals: streamline tax exemptions, address tax and customs fraud, modernize Office Burundais des Recettes (OBR) operations and interactions with taxpayers.
  - Digitalization: launch of a new module of ASYCUDA on June 2, 2023 to improve and automate trade-related FX flow management; module enables digitalization of customs declarations and cross-checking with related bank transactions via unique identification number per trade transaction.
  - OBR updated action plan: structured around three dimensions, nine operational objectives and sixty-seven priority actions.
- 2023/24 tax measures:
  - New taxes introduced (examples): mobile messaging, internet protocol (IP) communication, mobile financial services, services in the electronic communication sector and a new wealth tax; some existing taxes increased.
  - Expected revenue gains from these measures: BIF 128.4 billion (1.1 percent of GDP) in FY2023/24.
  - Focus on electronic invoicing and electronic filing/payment of all taxes (new IT system launching July 2023) to strengthen controls and ensure timely monitoring and daily transfer of government revenue to the Treasury.
- Tax system strengthening:
  - Limit use of discretionary exemptions through presidential decrees or ministerial orders.
  - Rationalize tax expenditures, tighten procedures for granting incentives, strengthen control of incentive use by beneficiaries.
  - Enhance capacity of tax policy department to cost and evaluate tax expenditures and report transparently to Parliament.
- Expenditure prioritization:
  - Pursue inclusive and sustainable growth via NDP implementation; accelerate investments and related reforms.
  - Streamline current expenditure and prioritize capital spending to strengthen production through quality infrastructure.
  - Establish monitoring and evaluation mechanism to improve expenditure planning and implementation.
- Social spending and protection:
  - Continue social policy focused on education, health and social protection to build human capital.
  - New national social protection policy and strategy in place to improve living conditions of pensioners in terms of social security.
  - Ongoing work to revise domestic fuel price structure to reflect cost-recovery and reduce currency mismatches driven by ER depreciation, while targeting assistance to the vulnerable through existing social programs.
  - Program includes a floor on social spending (IT).
- Fertilizer subsidies and state advances:
  - Fertilizer subsidies to be streamlined and better targeted to small farmers; aim to allow prices to reflect costs and use social assistance for targeted groups.
  - Details:
    - ITRACOM-Fertilisants (FOMI) production expansion in 2022/23; government advance payment BIF 300 billion to support increase in production from 100,000 tons to 350,000 tons and construction of two new units of 100,000 tons each.
    - Cumulative government advance payments to FOMI amount to BIF 600 billion as of February 10, 2023.
    - Of BIF 600 billion, BIF 74 billion repaid through a 70 percent discount on fertilizer prices, with BIF 114 billion still outstanding.
    - Balance to be reimbursed through the same fertilizer subsidy mechanism.
  - Large advances for fertilizer subsidies and publicly guaranteed lending schemes by the BRB will be gradually discontinued.
  - Better targeting through monitoring production areas and quantities requested.
- Wage reform:
  - Wage reform initiated in 2016 includes three phases:
    - (i) adjustment allowance for wage disparities during 2016-2020 with record freeze, total cost BIF 180 billion;
    - (ii) correction of pecuniary impacts of annual and grade promotions from 2016 to 2022, total cost BIF 72 billion for civilian staff and BIF 50 billion for state-owned enterprise (SOE) employees;
    - (iii) fair salary policy with cost BIF 150 billion for civil servants payable over 10 years (2023 to 2033), and estimated cost BIF 75 billion for SOE employees.
  - Fair wage policy to establish performance-based remuneration system; new salary structure to include job-based and performance-based components.
  - Measures to limit wage bill risks: strengthen payroll management via computerization, control recruitments, identify and remove ghost workers.
  - Hiring freeze in all public sectors since July 1, 2021, except defense and security, education, health, and the revenue administration.

*Source: 1bdiea2023001 - 1.      This memorandum describes the macroeconomic and financial policies that the*

### 29.      The public investment program (PIP) will continue in line with the NDP. The Uvinza-

### The public investment program (PIP) will continue in line with the NDP. The Uvinza-

### Public Investment Program (PIP) and Uvinza-Musongati-Kindu railway
- The Uvinza-Musongati-Kindu railway project will facilitate the transport of nickel products and other goods to ports in the East African Community.
- Cost estimates:
  - Section linking Uvinza (Tanzania) and Musongati-Gitega (Burundi): USD 1,319 million, excluding compensation for displaced people (cost of compensation currently being estimated).
  - Cost of the Musongati-Kindu section in the DRC: currently being estimated.
- Burundi’s planned financing package for the project includes:
  - Capital: BIF 258 billion each fiscal year (provided for in the 2022/23 and 2023/24 budgets).
  - AfDB grant: US$100 million.
  - Use of IMF SDRs allocation: USD 100 million.
  - Other sources of financing: yet to be determined.
- Implementation of remaining PIP projects will continue within the limits of budget availability.

### Fiscal financing, debt and borrowing stance
- Fiscal deficit financing objectives:
  - Safeguard macroeconomic stability, public debt sustainability and external sustainability.
  - Intensify re-engagement with the international community to maximize grants and concessional loans.
- Borrowing and financing commitments:
  - Commit to not borrow on non-concessional terms during the program period (QPC).
  - Monitor contracting or guaranteeing concessional external borrowing (IT).
  - Domestic financing should avoid crowding out the private sector and seek to develop the domestic capital market.
  - Monetary financing (excluding the SDR credit line resulting from the July 4, 2022 agreement with the Ministry of Finance) will only be used as a last resort, within program targets on Central Bank financing of the government (QPC) and the cap on the stock of statutory Treasury advances—10 percent of total revenues of fiscal year n-1 (structural benchmark, SB, Table 1 and IT).
- Commitment: No new domestic arrears (IT, Table 2) and no new external payments arrears (PC, Table 2).

### Improve financial management and public investment management
- Cash management improvements:
  - Annual cash flow plan to be continuously updated monthly and weekly to better monitor public expenditure.
  - Gradual extension of the Treasury Single Account to include local entities.
- Public investment management reforms:
  - Since 2021/2022, separation into commitment appropriations (overall cost of investment project to be launched during the financial year) and payment appropriations (cost of the phase of work during the same financial year).
  - Procurement plan is based on payment appropriations and not commitment appropriations.
  - Government plans to:
    - Identify all entities managing investment projects.
    - Ensure proper monitoring and reporting of the current budget line “construction et réhabilitation des infrastructures” (Ministry of Infrastructure).
    - Strengthen reporting on PIP execution based on physical and financial execution reports prepared by project management units.
    - Report on execution of all projects (including those currently outside the budget) in the PIP and the public investment financial management system (Système Informatique de Gestion Financière de l’Investissement Public or SIGFIP), using a unique project code per project in all databases.
  - Align PIP with the National Development Plan, sectoral strategies, the medium-term fiscal framework (MTFF)/medium-term budget framework (MTBF) and the budget law; ensure coordination between MFBPE, Cabinet, Directorates of Budget and Planification and the PPP unit.

### Budget discipline, transparency and oversight
- Extrabudgetary commitments:
  - Intend to terminate extrabudgetary commitments without prior legal authorization.
  - 2022/2023 Finance Law: public procurement contracts related to current spending valid for one year; contracting authority must confirm availability of funds before tender notice and prior to signing contract.
  - Study on budgetary impact of multi-year contracts (signed prior to FY2022/23) on current spending for ministries of education, health, defense, and social protection will be conducted (SB).
  - Annual impact of multi-year contracts signed prior to the 2022/2023 Budget Law will be better taken into account in public finance laws.
- Cour des Comptes (State Audit Office):
  - June 2022 organic public finance law grants Cour des Comptes authority to dismiss government accounting officers.
  - Government will submit bill establishing mission and functioning of Cour des Comptes and the procedure before this body to Parliament for adoption—once adopted and implemented, will allow sanctioning mismanagement including extra-budgetary expenditure without prior legal authorization.
- Quarterly reporting:
  - In accordance with the June 2022 Organic Law of Public Finance, quarterly budget implementation reports for the current year shall be produced and submitted to Parliament for comment.
  - First quarterly report on implementation of 2022/23 budget for July–September 2022 was prepared and transmitted to Parliament in November 2022; a revised report including comments and recommendations was returned to Parliament. The second quarter report is being prepared.
  - Submission deadlines for quarterly reports to be specified in general regulations for management of public budgets.

### Program budgeting and public financial management systems
- Transition to program budgeting (started 2022/23) will continue:
  - Annual Budget Work Plans of Ministries and some institutions established.
  - Preparation of budget programs for all Ministries completed; budget nomenclature harmonized with government’s chart of accounts.
  - Budget programs annexed to 2023/24 budget on a transitional basis.
  - Public financial management information system to be adapted to meet program budgeting requirements when implementing unified strategy for computerized public financial management.
  - Implementing texts of the organic law and manual for budget preparation and implementation to be updated.
  - All audits of management capacities of Ministries and constitutional institutions should be carried out by Cour des Comptes.
  - Expected outcome: facilitate public expenditure formulation, execution, monitoring and effectiveness.

### State-owned enterprises (SOEs) governance and reporting
- Management reforms:
  - Clarify list of SOEs, removing enterprises not meeting public ownership threshold.
  - Revise legal and regulatory framework governing SOEs to improve governance, competitiveness and limit fiscal risks.
- Reporting and budget practices:
  - Budget forecasts of SOEs annexed to 2022/23 and draft 2023/24 Finance Laws; practice to continue.
  - Annual financial statements of large SOEs (as defined by the Tax Administration) annexed to 2023/24 budget law.
  - By law, large SOEs produce quarterly budget execution reports and submit them to the Ministry of Finance.

### Public debt coverage, arrears and strategy
- Debt transparency and coverage:
  - Expanding public debt coverage in Public Debt Management Reports; latest report published in May 2023.
  - Report presents preliminary debt data at end-2022 of twenty-four (24) SOEs: BIF 1295.0 billion or 16.2 percent of GDP.
  - Report includes domestic arrears identified at end-2022: BIF 103.9 billion or 1.3 percent of GDP.
  - Formal requirement introduced (ordinance signed by Minister of Finance) to publish debt reports annually, within six months of the reporting period end, including all SOE debt and domestic arrears.
- Arrears clearance:
  - Process of estimating budget arrears ongoing and to be finalized by June 2023; a plan to clear them will follow.
  - Budget line for clearing arrears in 2022/23 Budget Law: BIF 2 billion (partly used).
  - Draft 2023/24 Budget Law allocates resources to clear all or part of these arrears.
  - Commitment: no new domestic arrears (IT) and no new external payments arrears (PC).
- Debt strategy and capacity building:
  - Short- and medium-term public sector debt management strategy to be developed in 2023 and updated regularly.
  - National public debt committee and technical committee (established in 2013) to be reinvigorated with appointment of new members by 2024.
  - Debt management unit to conduct debt sustainability analysis regularly and annex it to the debt strategy.
  - Debt stabilization measures, including reducing the fiscal deficit, to be taken when necessary.

### Capital market development and deficit financing diversification
- Capital market progress and objectives:
  - 2020: capital market law promulgated; law establishing Capital Market Regulatory Authority (ARMC).
  - ARMC Board of Directors appointed in 2021; recruitment process for its members well underway.
  - Licensing for market operators should start by 2024.
  - Stock Exchange expected to become operational by 2024.
- Issuance and market development:
  - Preparation and publication of a schedule for issuance of debt instruments to be effective by 2024.
  - Publication of issuance schedule intended to mobilize more participants and lower financing costs.
  - Efforts to broaden investor base and revitalize secondary market; improve liquidity and tradability of securities.
- Role of public-private partnerships (PPP):
  - Strengthening PPPs for financing and implementing selected public investment projects will remain a priority to complement other financing sources.

### Monetary policy stance and financial stability
- Monetary policy:
  - Monetary policy should remain prudent to ensure price stability.
  - After sizeable liquidity injections from 2016 to June 2022, the BRB has been tightening monetary policy since July 2022 to control inflation.
- Modernization of framework:
  - BRB is establishing a regulatory and institutional framework to modernize monetary policy.
  - A Policy Forecasting and Analysis System (FPAS) has been in place since 2017 with quarterly forecasts; institutionalization of FPAS is being finalized.
  - Plan to migrate from monetary aggregates targeting to inflation targeting by gradually limiting monetary financing of the fiscal deficit and normalizing monetary policy.
- Specific tightening measures:
  - BRB raised required reserves coefficient to 5 percent.
  - Plan to further tighten monetary policy, including raising the 7-day refinancing rate to 10 percent (PA).
  - Establish a ceiling on net domestic assets and a floor for net foreign assets at the BRB to internally monitor monetary creation and use a monetary target in line with projected GDP.
  - Program will monitor reserve money (floor, IT).
- Central Bank financing constraints:
  - Ceiling on stock of BRB advances to the Treasury set at 10 percent of the previous fiscal year's tax and non-tax revenue (IT).
  - Commitment: no new BRB disbursements to the Treasury other than statutory advances (i.e. Conventions, PC).
  - Long-term objective: ordinary advances should end in 2027 in accordance with Monetary Union of the East African Community roadmap.

### Strengthening banking sector resilience
- Oversight and indicators:
  - Better oversight and credit restructuring helped maintain NPL ratio at 2.9 percent at end-June 2022.
  - Develop additional indicators to monitor off-balance-sheet assets management and reliably reflect all assets (given that after 24 months unpaid loans should be managed off-balance-sheet).
- Capital, deposit insurance and intervention:
  - Minimum capital requirement of commercial banks will be increased.
  - BRB will create a deposit insurance system and a regulatory framework to facilitate early intervention.
- Currency exposure:
  - Repatriation requests by companies: € 116.2 million euros and USD 1.5 million.
  - Repatriation requests from commercial banks: USD 4.2 million that can be reinvested.
  - Foreign currency loans from commercial banks: equivalent value of BIF 286.4 billion BIF, or 10.5 percent of total loans.
  - These loans are sufficiently covered by guarantees in BIF, valued based on the parallel market price.

### BRB safeguards, audits and reserves management
- Safeguards and governance:
  - Commitment to implement recommendations from the 2022 safeguards assessment.
  - Request IMF technical assistance for legal reforms and analysis of BRB’s financial position.
  - Steps to establish a compliance function and strengthen internal audit capacity and coverage of high-risk areas.
  - Improve timeliness of finalization of BRB’s financial statements.
  - Review foreign exchange reserves management framework to align with leading practices.
- Audits of net international reserves (NIR):
  - Special audit of stock NIR of the BRB at end-December 2022 (assets and liabilities) undertaken by BRB’s external auditors (prior action).
  - Another audit to be conducted on the stock at end-July 2023 (SB).
  - Program will monitor the change in NIR (QPC).

### Exchange rate policy and market unification
- Unification and liberalization objectives:
  - Unification of official and parallel exchange rates will be effective as soon as possible.
  - BRB will gradually eliminate market restrictions; calculation of reference/official rate adjusted to reflect transactions between all market intermediaries and their clients.
  - Official exchange rate will be realigned to the market rate by end-November 2023 (SB).
- Legal and regulatory measures:
  - By end-June 2023, Government will include provisions in draft 2023/24 Budget Law giving BRB full power to adopt FX management-related regulations (PA).
- FX market operations:
  - BRB to introduce an FX market intervention strategy implemented through auctioning to avoid excessive volatility (with an appropriately high tolerance threshold given BRB's low stock of reserves).
  - Envisage allowing FX bureaus to purchase FX at freely negotiated rates and apply sale rates with a maximum margin of 2 percent, enforceable daily on average sales.
- Liberalization measures:
  - Revitalization of FX interbank market (MID), efficient allocation of foreign currency, and lifting domiciliation requirements at the BRB for certain foreign currency accounts.
  - Exporters still required to repatriate foreign currency; importers must prove release for consumption of goods and services for which FX requested and allocated.
- FX reserves and gold operations:
  - Unification expected to improve FX reserves by encouraging formal market repatriation of export proceeds and private transfers.
  - Gold buying and selling operations can potentially improve reserve levels; a governance framework on gold operations will be put in place covering pricing, due diligence procedures for counterparts, decision-making and internal reporting to ensure traceability.
  - New mining code adopted by the ministries council and under review at the parliament (as stated in source).
  - Program monitoring: change in NIR (QPC) and audit timetable noted above.

*Source: 1bdiea2023001 - Excerpt on public investment, fiscal, debt, monetary and exchange rate policies.*

### 55.      In order to avoid massive capital outflows, consistent and transitory capital flow

### 1bdiea2023001 - 55.      In order to avoid massive capital outflows, consistent and transitory capital flow

### Capital account and exchange rate unification
- To avoid massive capital outflows, "consistent and transitory capital flow measures or targeted restrictions on transactions will be considered to help mitigate the unintended effects of the ER unification."
- Burundi’s capital account is described as "relatively open," which "might be premature in the context of the unification and could induce capital outflows post-reform."
- "Necessary measures will be discussed with the IMF."

### Structural transformation objectives (National Development Plan)
- Objective: enable structural transformation for "strong, sustainable, resilient, inclusive growth, creating decent jobs for all and leading to the improvement of social well-being."
- Structural reforms will be carried out in "agriculture and livestock, energy, infrastructure, minerals, industry, ICT, etc."

### Mining sector reforms
- Objective: "Revitalize the mining sector to optimize the sector’s contribution to the country’s growth and socio-economic development by promoting mining product exports through structural reforms of this sector."
- Since 2020 the government has "embarked on a revision of the mining code" to address limitations of the 2013 code and to:
  - allow mutually beneficial contracts between Burundi and investors;
  - "allow local companies to actively participate in promoting minerals and industrial processing units to reduce exports of unrefined ores and increase their added value."

### Agricultural sector measures
- Goal: "Strengthen food security through the mechanization of agriculture" and implement "modern intensive agriculture" to ensure food security and promote market-based agriculture.
- Key measures:
  - "Improved access to agricultural inputs, through the policy of fertilizer subsidies, will enable farmers to gain access to such products at lower cost to boost agricultural production."
  - "Boost production through the development of wetlands, mechanization, large-scale agricultural irrigation, and regionalization of crops."
  - "Develop infrastructures to support the production, processing, conservation, and marketing of agro-pastoral products."
  - "Improve the fertility of the land and natural resource management to intensify agricultural and animal production with the aim of achieving sustainable increases in food supplies."

### Private sector, tourism, and industry
- Support for private sector development via:
  - strengthening PPPs;
  - improving the business climate;
  - creating industrial attraction zones;
  - enhancing quality infrastructure;
  - creating vocational training centers and incubation centers;
  - certifying quality control agencies;
  - enhancing governance of private sector stakeholders.
- Tourism: prepare a national tourism policy to "raise foreign exchange inflows and creating jobs, while channeling tourism revenues into the Treasury general account."
- Additional reforms: "rehabilitation and maintenance of existing hydro-electric centers, development of infrastructures to support revitalization and expansion of industry and telecommunications, and the creation of local industries for the extraction and transformation of mining products."

### Fiscal sector and public financial management (PFM) reforms
- Commitment to improving the PFM framework through a series of measures and eight complementary projects to deploy the new organic public finance law (adopted June 2022) and program-based budgeting:
  - adapt the BRB’s information system to manage the Treasury Single Account (TSA);
  - interface financial institutions’ information systems with the BRB system;
  - adapt the finance ministry’s expenditure management system to manage the single Treasury account;
  - promote electronic payments to collect government revenues;
  - operationalize the tax collection system by digitalizing the entire revenue collection system;
  - finalize and operationalize the system for the collection of municipal taxes (taxes communales);
  - provide public institutions—including non-electrified local entities—with a reliable, efficient, and accessible electric power system;
  - connect institutions located in non-covered zones to broadband networks.
- Additional PFM actions:
  - "Improve the quality of macroeconomic and budgetary forecasts" and budget preparation for multiyear perspective.
  - "Turn the Public Investment Project (PIP) into a full-fledged tool for budget programming" and strengthen project monitoring and evaluation.
  - "Improve budget execution procedures and governance" to ensure fiscal discipline, control over wage bill, develop expenditure chain information system, strengthen Treasury liquidity management and TSA, strengthen accounting arrangements and network of government accounting officers, improve fiscal information, and control fiscal risks linked to public debt, SOEs and PPPs.
- Establish a standing commission to monitor grant of exemptions under the National Investment Code; "A report on the efficiency of exemptions will be prepared and an estimate of the exemptions recorded in the previous year will be attached to the budget for the following year."

### Governance, anti-corruption, and AML/CFT
- Priorities: "The eradication of corruption and promotion of social justice" under the 2018-2027 National Development Plan.
- Government will "prepare, with IMF staff support, and publish a comprehensive governance diagnostic report, including specific recommendations and a time-bound action plan for implementing them (SB)."
- COVID-19 spending accountability:
  - First execution report on COVID-19 expenditures (October 15, 2020–August 12, 2021) audited by the Cour des Comptes and published January 2023.
  - Second audited report covering August 13, 2021 to December 22, 2022 published June 15, 2023.
  - Government intends to modify bid questionnaires to collect beneficial ownership information on companies awarded COVID-related contracts; will use commercial registry to identify shareholders in firms awarded contracts through 2022.
- AML/CFT:
  - Actions "in line with the action plan of the March 2023 report of the High-Level Mission to the Republic of Burundi" with a view to becoming a full member of ESAAMLG.
  - The national financial intelligence unit (CNRF) was set up in March 2020; executive bodies established but further work and amendments to the AML/CFT law required for operational independence.
  - Government will seek IMF support to strengthen the CNRF setup.

### Program financing, monitoring, and conditionality
- Program monitoring: "quantitative performance criteria, indicative targets, and structural benchmarks."
- Net foreign assets for end-December 2022 to undergo an external audit to yield a base for the pertinent quantitative performance criterion.
- Technical Memorandum of Understanding (TMU) describes definitions and data reporting requirements. Program monitored semiannually:
  - First review based on end-July 2023 quantitative targets.
  - Second review based on end-December 2023 quantitative targets.
- Proposed Prior Actions and Structural Benchmarks (selected actions and timing):
  - Prior actions:
    - "Complete a special audit of the NIR of the BRB at end-December 2022 (assets and liabilities)." — Prior action for the ECF approval (Objective: Assess data of the program’s initial stock of NIR)
    - "Promulgate, as part of the 2023/24 budget law, an article that gives the BRB full authority to adopt FX management-related regulations." — Prior action for ECF approval (Objective: Facilitate FX reforms)
    - "Raise the 7-day refinancing rate to 10 percent." — Prior action for the ECF approval (Objective: Monetary tightening)
  - Structural benchmarks:
    - "Complete the exchange rate realignment to the market exchange rate." — End-November 2023 (First review) (Objective: External sector rebalancing and eliminating the parallel market premium)
    - "Complete a special audit of the NIR of the BRB at end-July 2023 (assets and liabilities)." — End-November 2023 (First review) (Objective: Assess the end-July target)
    - "Complete a study on the budgetary impact of multi-year contracts, signed prior to FY2022/23, on current spending for the ministries of education, health, defense, and social protection." — End-June 2023 (First review) (Objective: Improve PFM and reduce contingent liabilities risks)
    - "Adopt law capping Treasury advances to 10 percent of total revenues of fiscal year n-1." — End-September 2023 (First review) (Objective: Limit monetary financing)
    - "Publish a governance diagnostic assessment, including a time-bound action plan." — End-December 2024 (Third review) (Objective: Improving governance and tackling corruption)

### Quantitative performance criteria and indicative targets (selected figures from Table 2)
- Performance Criteria (BIF billion, unless otherwise indicated) — selected dates and figures:
  - Fiscal primary balance (floor):
    - End-July: -50.0
    - End-Sept: -63.6
    - End-Dec: -17.8
    - End-Mar: -83.5
    - End-June: -205.1
  - BRB net financing of central government (ceiling):
    - End-July: 50.0
    - End-Sept: 0.0
    - End-Dec: 80.2
    - End-Mar: 80.2
    - End-June: 48.2
  - Change in net international reserves of the BRB (floor, US$ million):
    - End-July: -115.7
    - End-Sept: -66.8
    - End-Dec: -47.9
    - End-Mar: -28.8
    - End-June: 31.3
- Indicative Targets:
  - Domestic revenue (floor):
    - End-July: 78.9
    - End-Sept: 394.7
    - End-Dec: 778.9
    - End-Mar: 1198.1
    - End-June: 1638.7
  - Social spending (floor) 4/:
    - End-July: 29.8
    - End-Sept: 178.9
    - End-Dec: 391.7
    - End-Mar: 560.3
    - End-June: 779.5
  - Stock of BRB statutory advances to Treasury (Ceiling, 10 percent of previous FY revenue): 153.0 (at each listed date)
  - New domestic arrears (ceiling): 0.0 (at each listed date)
  - Contracting or guaranteeing concessional external borrowing (ceiling, US$ million) 5/:
    - End-July: 7.5
    - End-Sept: 10.6
    - End-Dec: 34.7
    - End-Mar: 3.1
    - End-June: 5.7
  - Reserve money (ceiling on stock) (upper bound):
    - End-July: 1375.9
    - End-Sept: 1134.2
    - End-Dec: 1170.4
    - End-Mar: 1207.9
    - End-June: 1246.6
- Continuous Performance Criteria (selected):
  - Contracting or guaranteeing non-concessional external borrowing (ceiling, US$ million): 0.0 (continuous)
  - Accumulation of external payments arrears (ceiling, US$ million): 0.0 (continuous)
- Memorandum item:
  - "Total PV of external debt (US$ million) ...... 946.9 ......"

Notes and definitions provided in the TMU include:
- "The changes in NIR are compared to NIRs at end-December of previous year."
- For program purposes, non-concessional external borrowing excludes: "(i) the use of IMF resources; (ii) lending by the World Bank and the African Development Bank; (iii) any BIF-denominated treasury bill and government bond holdings by nonresidents; and (iv) disbursements under loan contracts signed before December 31, 2022."
- The social spending floor is set at "90 percent of selected budget credit lines considered as social spending."
- The Standard Continuous Performance Criteria also apply: (i) not to impose or intensify restrictions on the making of payments and transfers for current international transactions, (ii) not to introduce or modify multiple currency practices, (iii) not to conclude bilateral payments agreements that are inconsistent with Article VIII, (iv) not to impose or intensify import restrictions for balance of payments reasons.

*Source: IMF staff projections and the program documentation in the provided content.*

### 7. For the purposes of the program, the following definitions will be used:

### 1bdiea2023001 - 7. For the purposes of the program, the following definitions will be used:

### Key definitions
- External and domestic debt: defined on a residency basis of the creditor.  
- Fiscal year: starts on July 1 and ends on June 30.  
- Banque de la République du Burundi (BRB): the central bank responsible for formulation and implementation of monetary policy, bank supervision, and the payment system.  
- Domestic banking system: BRB and licensed lending institutions operating in the Republic of Burundi.  
- Central Government: includes ministries, departments, and agencies, and other selected units of government that exercise authority over the entire economic territory as described in Annex I Table 1.  
- Public Sector (for program purposes): comprises the general government, all non-financial public enterprises (non-financial enterprises and agencies in which the government owns more than 50 percent of the shares, but which are not consolidated in the budget), and any other newly created non-financial public development institution.  
- Foreign-financed Public Investment Program (PIP) loans and grants: investments in infrastructure and social sectors agreed by the central government and donors; fully financed by related grants and loans and does not involve any additional financing commitment from the central government. Related grants: grants provided by donors financing projects included in the foreign-financed PIP.  
- External budget support loans and grants: loans and grants received by the central government for direct budget support from foreign partners and not related to the foreign-financed PIP.

### Debt: scope and instruments
- Definition of debt (program purposes): as set out in paragraph 8 of the Guidelines on Public Debt Conditionality in Fund Arrangements attached to Executive Board Decision No. 15688–(14/107), amended by Decision No.16919-(20/103), adopted October 28, 2020. Debt is a current (not contingent) liability created under a contractual agreement through provision of value in assets (including currency) or services, requiring obligor payments in assets (including currency) or services at future point(s) discharging principal and/or interest.  
- Primary forms of debt:
  - Loans: advances of money including deposits, bonds, debentures, commercial loans, buyers’ credits, and temporary exchanges equivalent to fully collateralized loans (e.g., repurchase agreements and official swap arrangements).  
  - Suppliers’ credits: contracts permitting deferral of payments after delivery of goods or services.  
  - Leases: property provided for specified period(s) where lessor retains title; debt equals the present value (at inception) of all lease payments expected during the agreement excluding payments covering operation, repair or maintenance.  
- Arrears, penalties, and judicially awarded damages arising from failure to pay under a contractual obligation that constitutes debt are debt. Failure to make payment on an obligation not considered debt (e.g., payment on delivery) will not give rise to debt.  
- Debt also refers to commitments contracted or guaranteed for which value has not been received.

### Concessionality and exclusions
- Concessional Debt: debt with a grant element of 35 percent or more.  
  - Grant element = (nominal value – present value) expressed as a percentage of nominal value.  
  - Present value is calculated at the date contracted by discounting future debt service payments using a discount rate of 5 percent.  
  - Calculation accounts for maturity, grace period, payment schedule, upfront commissions, and management fees; performed by authorities and verified by IMF staff.  
- Non-concessional debt: grant element less than 35 percent.  
- For program purposes, non-concessional external borrowing excludes:
  - (i) the use of IMF resources;  
  - (ii) lending by The World Bank and the African Development Bank (AfDB);  
  - (iii) any BIF-denominated treasury bill and government bond holdings by nonresidents; and  
  - (iv) disbursements under loan contracts signed before December 31, 2022.

### Guarantees and arrears (program monitoring)
- Guarantees: arise from any explicit legal obligation of the public sector to service a debt in event of debtor nonpayment (payments in cash or in kind), or from any implicit legal or contractual obligation of the public sector to finance partially or fully a shortfall incurred by the debtor.  
- Stock of external payment arrears (program monitoring): end-of-period amount of external debt service due and not paid within the grace period specified in the debt contract, including contractual and late interest. For arrears to exist, a creditor must claim payment. Amounts in dispute are not arrears. Arrears for which a clearance framework/rescheduling or restructuring has been agreed with the creditor are not considered arrears for program monitoring purposes. Arrears for purposes of the arrangement include any debt service due under such agreements that have not been paid.

### Program exchange rates and valuation changes
- Program exchange rates: IMF staff estimates and projections of the exchange rate of the BIF to the U.S. dollar at the time the ECF-supported program is approved by the IMF Executive Board. Program exchange rates of the BIF to the U.S. dollar are set in Table 1.  
- Valuation changes (program exchange rates): foreign-currency denominated economic and financial variables will first be expressed in US dollars and evaluated in BIF at the program exchange rates.  
- Program exchange rate example (as of May 31, 2023): SDR0.75; BIF2822.15. Source: Authorities and IMF, May 31, 2023.

### Quantitative performance criteria and definitions
- Floor on Fiscal Primary Balance:
  - Definition: fiscal primary balance of the central government = overall cash fiscal balance net of interest payments on central government debt.  
  - Overall cash fiscal balance measured from the financing side as net cash flow from financing activities = net incurrence of liabilities minus net acquisition of financial assets other than cash. Measured cumulatively over the fiscal year at current exchange rates. Components include:
    - change in BRB net claims on the central government (all central government deposits, counterpart deposits, BRB loans and advances to central government, BRB holdings of government securities excluding treasury bills issued as part of BRB recapitalization, and the privatization account);  
    - change in net claims on the central government of the rest of the domestic banking system (loans, overdrafts, cash advances, holdings of treasury bills or other securities; liabilities such as deposits);  
    - change in net claims on the central government of domestic nonbank institutions and households (Treasury bills, bonds or other government securities held by nonbank institutions and households including nonresidents and nonresident financial institutions, plus any other liabilities of general government to domestic nonbank institutions or households);  
    - change in net foreign liabilities of the central government (central government debt to foreign sovereigns and foreign financial and nonfinancial institutions, includes net foreign loans disbursed for budgetary support and PIP financing);  
    - withdrawal of gross proceeds from privatization of state property, gold and precious metal (all receipts originating from sale of central government property, gold and precious metal holdings);  
    - change in gross arrears of the central government (domestic or external arrears).  
  - All changes calculated as difference between end-of-period stocks, net of any valuation changes from currency movements.  
  - External and domestic net lending recorded as financing items are excluded from fiscal balance calculation (treated as expenditure when loans made and revenue when repaid).  
  - Adjustors (Table 2): floor on fiscal primary balance adjusted downward for windfall of external loans or shortfall of external budget support; not adjusted upward for higher revenue collection or a windfall of external budget support.

- Ceiling on BRB Financing of Central Government:
  - Definition: sum of the change in stocks of BRB’s net claims on the central government (all deposits, counterpart deposits, BRB loans and advances, BRB holdings of government securities excluding treasury bills issued as part of BRB recapitalization, and privatization account).  
  - Adjustors (Table 2): ceiling subject to an upward adjustment of 10 percent of the previous fiscal year’s domestic revenue (excluding grants) in excess of programmed domestic revenue for that fiscal year. Also adjusted for excesses/shortfalls in net disbursements under central bank credit lines related to SDR allocations compared to programmed projections.

- Ceiling on Gross Disbursements to the Treasury under BRB-Central Government Loan Agreements (Conventions):
  - Definition: BRB disbursements to the Treasury not part of statutory BRB advances to the Treasury; exclude financing of coffee, tea and maize harvests.  
  - Ceiling set at zero.

- Floor on Changes in Net International Reserves (NIR) of the BRB:
  - Definition: NIR = gross international reserves minus official reserve liabilities. NIR monitored in U.S. dollars using program exchange rates as of May 31, 2023 (Text Table 1).  
  - Gross official international reserve assets (sum of): (i) monetary gold; (ii) convertible foreign currency; (iii) unencumbered foreign-currency deposits at non-resident banks; (iv) foreign securities and deposits; (v) SDR holdings; and (vi) reserve position with the IMF.  
  - Gross international reserves exclude: (i) non-convertible currencies; (ii) encumbered reserve assets (pledged, swapped maturing < one year, or used as collateral/guarantee); (iii) reserve requirements on other depository corporations’ foreign currency deposits; (iv) foreign assets not readily available to or not controlled by the BRB; and (v) foreign currency claims on residents in Burundi.  
  - Convertible foreign currencies (COFER survey): U.S. dollar, Euro, British pound, Japanese yen, Chinese yuan, Swiss franc, Canadian dollar, and Australian dollar.  
  - Foreign liabilities: short-term (one year or less original maturity) foreign exchange liabilities of the BRB to residents and non-residents, plus any outstanding use of IMF credit. Defined to include:
    - (i) Outstanding IMF loan;  
    - (ii) Short-term scheduled debt service (principal and interest);  
    - (iii) Foreign currency liabilities of the BRB to nonresidents with remaining maturity up to and including one year, on remaining maturity basis;  
    - (iv) Foreign currency liabilities of any maturity of the BRB to residents, including reserves and deposits of commercial banks; and  
    - (v) commitments to sell foreign exchange arising from derivatives (futures, forwards, swaps, options).  
  - Foreign currency owed to commercial banks as part of swap arrangements treated as a reserve liability. Total international reserves and NIR decline with BRB provision of foreign assets through foreign currency swaps. Valuation at program exchange rates.

  - Adjustors: floor on change in stock of NIR adjusted upward by 10 percent of the deviation in excess of programmed projections of budget support and project loans and grants as specified in Tables 1 and 2 and downward to full extent of shortfall from programmed projections of these variables. Also adjusted upward (downward) to full extent of any shortfall (excess) in amortization and interest payments of public and publicly guaranteed external debt relative to projected amounts in Tables 1 and 2. Adjusted downward for excess imports related to swine and rift Valley fever shocks not financed with external loans or grants. For the 2023 QPCs, the floor in the change of NIR will be adjusted downward (upward) by the difference between the stock of NIR at end-December 2022 computed in the program and the one estimated by external auditors.

- Ceiling on Contracting or Guaranteeing of any New Public and Publicly Guaranteed (PPG) Non-Concessional External Borrowing:
  - Coverage: ceiling applies to contracting and/or guaranteeing of new non-concessional short-term external debt (original maturity up to and including one year) and new non-concessional medium- and long-term external debt (original maturities > one year) by the central government. Also applies to debt and commitments contracted/guaranteed for which value has not yet been received. Government should consult IMF staff before contracting/guaranteeing new external debt to confirm grant element.  
  - Exclusions from external debt limits: disbursements by the IMF, The World Bank and the AfDB; rescheduling/refinancing on terms more favorable to debtor; rollover of existing guarantees; import-related credits (“trade credits”); securitization of pledged reserves; loans classified as international reserve liabilities of BRB (liabilities of BRB to nonresidents with original maturity up to and including one year). Disbursements under non-concessional external loan contracted before December 31, 2022 (e.g., loans from OPEC Fund and Exim Bank India) excluded.  
  - Non-concessional external borrowing defined as new external debt with grant element lower than 35 percent (see paragraph B.7).  
  - Valuation of external debt denominated in currencies other than U.S. dollar: valued in U.S. dollars at exchange rate stipulated in contract if one exists; otherwise at exchange rate prevailing at time contracting/guaranteeing takes place.

- Ceiling on External Payment Arrears:
  - External arrears of the central government on a given date: overdue external debt obligations of the central government on that date. Government will provide data on actual payments as part of monthly budget execution reports submitted to IMF staff (Table 3).

### Other operational notes
- All changes for fiscal and balance calculations are differences between end-of-period stocks net of valuation changes from currency movements.  
- Treatment of net lending: excluded from fiscal balance (treated as expenditure when loans are made and as revenue when loans repaid).  
- Several ceilings, floors and adjustors reference Tables 1, 2, and 3 and program exchange rates as of May 31, 2023.

*Source: 1bdiea2023001 (excerpts from the IMF document).*

### 27.       Definition. The stock of BRB advances to the Treasury is defined as the BRB’s stock of

### 1bdiea2023001 - 27.       Definition. The stock of BRB advances to the Treasury is defined as the BRB’s stock of 

### Definitions and Quantitative Limits
- Stock of BRB advances to the Treasury: the BRB’s stock of statutory loans and advances that the BRB extends to the central government.
- Ceiling on the stock of BRB advances to the Treasury: set at 10 percent of the previous fiscal year’s domestic revenue (excluding grants).
- Reserve money (ceiling on the stock): Reserve money consists of currency issued by the BRB (currency in circulation), commercial banks reserves and other non-bank deposits. More specifically, reserve money is calculated as the sum of:
  - cash in circulation outside banks,
  - banking sector deposits, and
  - liquidity held by banks and other institutional entities that have accounts at the central bank.
- Domestic revenue (floor): includes all taxes (and custom revenues) and nontax revenue collected under the central government budget; measured on a cumulative basis over the fiscal year. Excludes proceeds from loans, other banking system credits, issuance of securities, or from the sale of state assets (including gold and other minerals). Custom revenues include customs duties and other taxes (including VAT) on international trade and transactions.
- Domestic arrears (ceiling on new domestic arrears): domestic arrears of the central government are defined as overdue domestic obligations at the end of the month for salaries and pensions and more than 40 days overdue for all other outstanding obligations.
- Social spending (floor): defined as the sum of expenditures in the education, health, and social protection sectors under selected budget lines provided in Annex II. The floor is calculated as 90 percent of budgeted social spending.
- Concessional external borrowing (ceiling): new external debt with a grant element of 35 percent or more as defined in paragraph 7.

### Adjustors and Operational Details
- BRB advances to the Treasury (cash management adjustor): ceiling subject to an upward adjustment of 10 percent of the previous fiscal year’s domestic revenue (excluding grants) in excess of programmed domestic revenue for that fiscal year.
- Monetary policy adjustor (Table 2): Previous fiscal year’s domestic revenue programmed, excluding grants = 1530.3 (BIF billion) at each test date (End-July, End-Sept, End-Dec, End-Mar, End-June).
- Net disbursements under central bank credit lines related SDR allocations (adjustor): 123.9, 185.9, 275.2, 275.2, 477.5 (BIF billion) at the respective test dates.
- NIR adjustors (US$ million):
  - External project and program loans (adjustor): 48.6, 72.9, 166.4, 2.9, 34.5 (at End-July, End-Sept, End-Dec, End-Mar, End-June).
  - External project and program grants (adjustor): 202.4, 303.6, 464.0, 75.4, 186.9.
  - Amortization and interest payments of public and publicly guaranteed external debt (adjustor): 2.4, 14.4, 16.4, 10.2, 11.3.
  - Imports related to swine and rift Valley fever not financed with external loans or grants (adjustor): 0.7, 1.1, 1.1, 0.0, 0.0.
- Fiscal adjustors (BIF billion):
  - External project and budget loans (adjustor; windfall): 82.8, 124.2, 343.5, 355.2, 426.0.
  - External budget support grants (adjustor; shortfall): 0.0, 0.0, 208.1, 208.1, 208.1.
- Continuous performance criteria:
  - Contracting or guaranteeing non-concessional external borrowing (ceiling, US$ million): 0.0 at all test dates.
  - Accumulation of external payments arrears (ceiling, US$ million): 0.0 at all test dates.

### Proposed Quantitative Performance Criteria and Indicative Targets (selected key figures)
- Fiscal primary balance (floor): -50.0 (End-July), -63.6 (End-Sept), -17.8 (End-Dec), -83.5 (End-Mar), -205.1 (End-June) (BIF million).
- BRB net financing of central government (ceiling): 50.0 (End-July), 0.0 (End-Sept), 80.2 (End-Dec), 80.2 (End-Mar), 248.2 (End-June) (BIF million).
- Ceiling on gross disbursements to the Treasury under other loan agreements with the BRB (Conventions): 0.0 at all listed test dates (BIF million).
- Change in net international reserves of the BRB (floor, US$ million): -115.7 (End-July), -66.8 (End-Sept), -47.9 (End-Dec), -28.8 (End-Mar), 31.3 (End-June).
- Indicative targets — Domestic revenue (floor): 78.9 (End-July), 394.7 (End-Sept), 778.9 (End-Dec), 1198.1 (End-Mar), 1638.7 (End-June) (BIF million).
- Indicative targets — Social spending (floor): 29.8 (End-July), 178.9 (End-Sept), 391.7 (End-Dec), 560.3 (End-Mar), 779.5 (End-June) (BIF million). Note: social spending floor is set at 90 percent of selected budget credit lines considered as social spending.
- Indicative targets — Stock of BRB statutory advances to Treasury (ceiling, 10 percent of previous FY revenue): 153.0 at all test dates (BIF million).
- Indicative targets — New domestic arrears (ceiling): 0.0 at all test dates.
- Indicative targets — Contracting or guaranteeing concessional external borrowing (ceiling, US$ million): 7.5 (End-July), 10.6 (End-Sept), 34.7 (End-Dec), 3.1 (End-Mar), 5.7 (End-June).
- Indicative targets — Reserve money (ceiling on stock) (upper bound): 1375.9 (End-July), 1134.2 (End-Sept), 1170.4 (End-Dec), 1207.9 (End-Mar), 1246.6 (End-June).
- Memorandum: Total PV of external debt (US$ million): ......946.9...... (presentation preserved as in table).

### Reporting Requirements for Program Monitoring (selected obligations, frequency, and lags)
- BRB analytical balance sheet using actual exchange rates: Weekly, lag 4 weeks.
- BRB balance sheet using actual exchange rates (monthly) and for test-date months using both actual and program exchange rates: Monthly, lag 4 weeks.
- BRB monetary survey; commercial banks' balance sheets and income statement (aggregated); capital assessment data; main factors of loan portfolio growth: Monthly, lag 8 weeks.
- BRB detailed report on movements in gold: Monthly, lag 4 weeks.
- BRB foreign auction regulation publication: Quarterly, lag 4 weeks.
- BRB consolidated balance sheet and income statement of banks; sectoral distribution of loans and NPLs by currency; restructured and renewed loans; largest exposures; loan classification; Nonperforming loans for microfinancing organization: Monthly, lag 12 weeks.
- MoF budget execution report of the central government (TOFE) including fiscal revenues, current and capital expenditures, net lending and financing; report on on-lending of financial assets and liabilities of the central government: Monthly, lag 8 weeks.
- MoF actual disbursements under the public investment program, budgetary grants, and grants in kind: Quarterly, lag 12 weeks.
- MoF reports on social spending using budget lines in Annex II: Quarterly, lag 8 weeks.
- BRB liquidity loans and lender-of-last-resort loans extended by BRB (excluding normal BRB refinancing of banks): Monthly, lag 4 weeks.
- BRB net and gross international reserves including gold holdings and daily FX operations intended to influence the exchange rate: Daily, lag 2 weeks.
- Additional reporting items include reserve composition by currency and instrument (Quarterly, 12 weeks), current account and capital account data (Quarterly, 12 weeks), foreign trade data (Monthly, 6 weeks), remittances by country of origin and currency (Monthly, 6 weeks), CPI by category (Monthly, 4 weeks), and quarterly national accounts (Quarterly, 6 weeks).

### Public Sector Coverage (Annex I, selected points)
- Annex I describes entities of the central government covered in the ECF-supported program and other entities; may be updated during the program.
- Annex I Table 1 lists entities of the budgetary central government (examples include: PRESIDENCE DE LA REPUBLIQUE; VICE-PRESIDENCE; PREMIER MINISTERE; MINISTERE DES FINANCES, DU BUDGET ET DE LA PLANIFICATION ECONOMIQUE; MINISTERE DE L' EDUCATION NATIONALE ET DE LA RECHERCHE SCIENTIFIQUE; MINISTERE DE LA SANTE PUBLIQUE ET DE LA LUTTE CONTRE LE SIDA; and multiple diplomatic missions).
- Annex I Table 2 lists other entities of the general government not yet included in fiscal reporting requirements (examples include: AGENCE DE REGULATION ET DE CONTROLE DES TELECOMMUNICATIONS (ARCT); ECOLE NATIONALE D'ADMINISTRATION (ENA); INSTITUT SUPERIEUR DE GESTION DES ENTREPRISES (ISGE); DIRECTION GENERALE DE LA R.T.N.B; CENTRE HOSPITALO-UNIVERSITAIRE DE KAMENGE (CHUK)).

*Source: IMF staff projections*

### 2.10  COMMISSION NATIONALE SCIENCE, TECHNOLOGIE ET INNOVATION

### 2.10  COMMISSION NATIONALE SCIENCE, TECHNOLOGIE ET INNOVATION

### Other entities of the general government (continued) — numbered entries (selected)
- 2.10  COMMISSION NATIONALE SCIENCE, TECHNOLOGIE ET INNOVATION
- 2.11  UNIVERSITE DU BURUNDI
- 2.12  INSTITUT NATIONAL DE SANTE PUBLIQUE (INSP)
- 2.13  OFFICE BURUNDAIS DES MINES ET CARRIERES (OBM)
- 2.14  AGENCE DE L'HYDRAULIQUE ET D'ASSAINISSEMENT EN MILIEU RURAL (AHAMR)
- 2.15  FONDS D'IMPULSION DE GARANTIE/ FIGA
- 2.16  SITES ET MUSEES
- 2.17  SOCIETÉ HOTELIERE ET TOURISTIQUE DU BURUNDI (SHTB)
- 2.18  CENTRE NEURO-PSYCHIATRIQUE DE KAMENGE (CNPK)
- 2.19  HOPITAL PRINCE LOUIS RWAGASORE
- 2.20  HOPITAL PRINCE REGENT CHARLES
- 2.21  HOPITAL DU CINQUANTENAIRE NATWE TURASHOBOYE DE KARUSI
- 2.22  HOPITAL DE LA POLICE NATIONALE DU BURUNDI (HPNB)
- 2.23  HOPITAL MILITAIRE DE KAMENGE
- 2.24  AGENCE DE DEVELOPPEMENT BURUNDAIS (ADB)
- 2.25  INSPECTION GENERALE DE L'ETAT
- 2.26  OFFICE DE LA PREMIERE DAME POUR LE DEVELOPPEMENT AU BURUNDI (OPDD-BURUNDI)
- 2.27  COMMISSION VERITE ET RECONCILIATION
- 2.28  CONSEIL ECONOMIQUE ET SOCIAL
- 2.29  CONSEIL SUPERIEUR DE LA MAGISTRATURE
- 2.30  CONSEIL NATIONAL DE LA COMMUNICATION (CNC)
- 2.31  BUREAU D'ETUDE STRATEGIQUE ET DEVELOPPEMENT
- 2.32  BUREAU DE CENTRALISATION GEOMATIQUE
- 2.33  COMITE DECISIONNEL SUR LE CLIMAT DES AFFAIRES
- 2.34  COMMISSION FONCIERE NATIONALE
- 2.35  SECRETARIAT EXECUTIF PERMANENT DE LA PLATE FORME MULTISECTORIELLE DE SECURITE ALIMENTATAIRE ET NUTRITION
- 2.36  AGENCE NATIONALE DE PROMOTION ET DE REGULATION DES SOCIETES COOPERATIVES AU BURUNDI (ANACOOP)
- 2.37  FONDS-NATIONAL-D-INVESTISSEMENT-COMMUNAL (FONIC)
- 2.38  OFFICE OF THE GLOBAL AIDS COORDINATOR (OGAC)
- 2.39  RÉGIE MILITAIRE DE CONSTRUCTION
- 2.40  AUTORITE DE REGULATION DES MARCHES PUBLICS (ARMP)
- 2.41  BRIGADE ANTI CORRUPTION
- 2.42  AGENCE DE REGULATION ET DE CONTROLE DES ASSURANCES (ARCA)
- 2.43  AGENCE DE PARTENARIAT PUBLIC PRIVE (PPP)= ARCP
- 2.44  OFFICE BURUNDAIS DES RECETTES (OBR)
- 2.45  INSTITUT DES STATISTIQUES ET ETUDES ECONOMIQUES DU BURUNDI (ISTEEBU)
- 2.46  CENTRE D'ETUDES ET DOCUMENTATIONS JURIDIQUES
- 2.47  TITRES FONCIERS ET AU CADASTRE NATIONAL
- 2.48  COUR SPECIALE TERRES ET AUTRES BIENS
- 2.49  COUR ANTI-CORRUPTION
- 2.50  SERVICE NATIONAL DE LEGISLATION
- 2.51  CENTRE DE FORMATION PROFESSIONNELLE DE LA JUSTICE
- 2.52  DIRECTION GENERALE DES AFFAIRES PENITENTIAIRES
- 2.53  SECRETARIAT EXECUTIF DE REFORMS DES ADMINISTRATION PUBLIQUES (SERAP)
- 2.54  SECRETARIAT EXECUTIF DE DIALOGUE SOCIAL
- 2.55  OFFICE BURUNDAIS DE L'EMPLOI ET DE LA MAIN D'OEUVRE (OBEM)
- 2.56  BURUNDIAN CENTRE FOR READING AND CULTURAL ACTIVITIES (CEBULAC)
- 2.57  OFFICE BURUNDAIS DU DROIT D'AUTEUR
- 2.58  MAISON DE LA CULTURE
- 2.59  FONDS DE L'INSERTION DES JEUNES (FIJ)
- 2.60  AGENCE BURUNDAISE POUR L'EMPLOI DES JEUNES
- 2.61  AGENCE BURUNDAISE DE PRESSE (ABP)
- 2.62  DIRECTION GENERALE DES PUBLICATIONS DE PRESSE BURUNDAISE (DGPPB)
- 2.63  DIRECTION GENERALE DU CIEP
- 2.64  CENTRE DE FORMATION ARTISANALE DE GITEGA
- 2.65  CENTRE DE FORMATION ARTISANALE DE KAMENGE
- 2.66  CENTRE REGIONAL D’APPRENTISSAGE MULTISECTORIEL DES JEUNES ET COMMUNAUTES REGROUPEES EN COOPERATIVES DE RUSI, PROVINCE KARUSI
- 2.67  COMMISSION NATIONALE DE L'ENSEIGNEMENT SUPERIEUR (CNS)
- 2.68  AUTORITE BURUNDAIS DE REGULATION DES MEDICAMENTS ET DES ALIMENTS (ABREMA)
- 2.69  CENTRE NATIONAL DE REFERENCE EN KINESITHERAPIE ET READAPTATION MEDICALE (CNRKR)
- 2.70  SECRETARIAT PERMANENT DU COUNSEIL NATIONAL DE LUTTE CONTRE LE SIDA (SP/CNLS)
- 2.71  CENTRE ANTI-TUBERCULEUX DE BUJUMBURA
- 2.72  CENTRE NATIONAL DE TRANSFUSION SANGUINE (CNTS)
- 2.73  CENTRE NATIONAL DE READAPTATION SOCIO-PROFESSIONNELLE (CNRSP)
- 2.74  CENTRE NATIONAL D'APPAREILLAGE ET DE REEDUCATION (CNAR)
- 2.75  CENTRE HUMURA
- 2.76  CENTRE DE PROMOTION DES DROITS DE L'HOMME (CPDH)
- 2.77  CENTRE REGIONAL DE READAPTATION SOCIO-PROFESSIONNELLE (ANTENNE NGOZI)
- 2.78  CENTRES POUR HANDICAPES ET ORPHELINATS
- 2.79  FONDS D'APPUI A LA PROTECTION SOCIALE (FAPS)
- 2.80  CENTRE D'EXPOSITION VENTE POUR LA PROMOTION DE L'ARTISANAT ET DU COMMERCE
- 2.81  APPUI A LA PROTECTION DE LA FEMME
- 2.82  PROJET CADRE DE REINTEGRATION DES SINISTRES
- 2.83  SECRETARIAT EXECUTIF PERMANENT DE LA COMMISSION NATIOANALE DE LA PROTECTION SOCIALE (SEP/ CNPS)
- 2.84  PROJET ENFANT SOLEIL
- 2.85  CENTRE D'ENCADREMENT ET DE REINSERTION DES ENFANTS SOLEIL DE GIHOSHA (CERES)
- 2.86  GENCE NATIONALE DE GESTION DU STOCK DE SECURITE. ALIMENTAIRE (ANAGESSA)
- 2.87  INSTITUT DES SCIENCES AGRONOMIQUES DU BURUNDI (ISABU)
- 2.88  OFFICE BURUNDAIS POUR LA PROTECTION DE L'ENVIRONNEMENT (OBPE)
- 2.89  INSTITUT GÉOGRAPHIQUE DU BURUNDI (IGEBU)
- 2.90  OFFICE DE L'HUILE DE PALME (OHP)
- 2.91  DIRECTION GENERALE DE L'OFFICE NATIONAL DE CONTRÔLE ET DE CERTIFICATION DES SEMENCES (ONCCS)
- 2.92  OFFICE DES TRANSPORTS EN COMMUN(OTRACO)
- 2.93  COMMISSION TECHNIQUE DE SECURITE DE LA NAVIGATION
- 2.94  BUREAU DE NORMALISATION ET DE CONTROLE DE LA QUALITE (BBN)
- 2.95  SECRETARIAT PERMANENT CADRE DE DIALOGUE
- 2.96  AUTORITE MARITIME ET AEROPORTUAIRE
- 2.97  COMMISSION NATIONALE SUR LA SECURITE ROUTIERE (CNSR)
- 2.98  CENTRE NATIONAL DE TECHNOLOGIES ALIMENTAIRES (CNTA)
- 2.99  CENTRE DE PROMOTION ARTISANALE DE KAMENGE (C.P.A.)
- 2.100 AUTORITE DE REGULATION, DES SECTEURS DE L'EAU POTABLE ET DE L'ENERGIE (AREEN)
- 2.101 AGENCE BURUNDAISE D'ELECTRIFICATION RURALE (ABER)
- 2.102 OFFICE BURUNDAIS DE L'URBANISME, DE L'HABITAT ET DE LA CONSTRUCTION (OBUHA)
- 2.103 AGENCE ROUTIERE DU BURUNDI (ARB)
- 2.104 HOPITAL RUSHUBI
- 2.105 HOPITAL DE BUHIGA (KARUZI)
- 2.106 HOPITAL DE BUYE
- 2.107 HOPITAL DE BURURI
- 2.108 HOPITAL DE KIRUNDO
- 2.109 HOPITAL MUSONGATI
- 2.110 HOPITAL BWIZA JABE
- 2.111 HOPITAL DE CANKUZO
- 2.112 HOPITAL DE MURAMVYA
- 2.113 HOPITAL BUBANZA
- 2.114 HOPITAL DE GITEGA
- 2.115 HOPITAL GASHOHO
- 2.116 HOPITAL MUSENYI
- 2.117 HOPITAL DE RWIBAGA
- 2.118 HOPITAL NTITA
- 2.119 HOPITAL DE NGOZI
- 2.120 HOPITAL DE RUMONGE
- 2.121 HOPITAL GAHOMBO
- 2.122 HOPITAL DE GIHOFI
- 2.123 HOPITAL RUZIBA
- 2.124 HOPITAL NYANZA- LAC
- 2.125 HOPITAL REMA
- 2.126 HOPITAL MPANDA
- 2.127 HOPITAL DE MABAYI
- 2.128 HOPITAL GITERANYI
- 2.129 SANATORIUM KIBUMBU
- 2.130 HOPITAL GIKO
- 2.131 CENTRE DE MEDECINE COMMUNAUTAIRE DE BUYENZI
- 2.132 HOPITAL D' I JENDA
- 2.133 HOPITAL MUSEMA
- 2.134 HOPITAL DE RUTANA
- 2.135 HOPITAL MATANA
- 2.136 HOPITAL DE MAKAMBA
- 2.137 HOPITAL GISURU
- 2.138 HOPITAL NDORA
- 2.139 HOPITAL DE CIBITOKE
- 2.140 HOPITAL DE MUYINGA
- 2.141 HOPITAL DE FOTA
- 2.142 HOPITAL GATUMBA
- 2.143 HOPITAL KINYINYA
- 2.144 HOPITAL KABEZI
- 2.145 HOPITAL DE KAYANZA
- 2.146 HOPITAL DE RUTOVU
- 2.147 HOPITAL MUKENKE
- 2.148 HOPITAL DE RUYIGI
- 2.149 HOPITAL KAMENGE
- 2.150 HOPITAL DE MURORE
- 2.151 HOPITAL DE KIGANDA
- 2.152 HOPITAL GIHANGA
- 2.153 HOPITAL DE MUTAHO
- 2.154 HOPITAL DE KIBUMBU (MWARO)
- 2.155 HOPITAL COMMUNAL DE BUGENYUZI
- 2.156 HOPITAL COMMUNAL CIRAMBO
- 2.157 HOPITAL COMMUNAL BUTIHINDA
- 2.158 HOPITAL DE DISTRICT GITERANYI
- 2.159 HOPITAL COMMUNAL GASORWE
- 2.160 HOPITAL COMMUNAL MISHIHA
- 2.161 HOPITAL DE DISTRICT DE CANKUZO
- 2.162 HOPITAL DE DISTRICT RUTANA
- 2.163 HOPITAL DE DISTRICT KAMENGE
- 2.164 CENTRE DE MEDECINE COMMUNAUTAIRE DE KAMENGE
- 2.165 CENTRE DE MEDECINE COMMUNAUTAIRE BWIZA JABE
- 2.166 HOPITAL COMMUNAL MBUYE

(Note: the source continues with extensive lists of social security entities, local governments/communes, and public non-financial corporations; the numbering proceeds through sections 3, 4, and 5 in the source.)

### Selected subsequent headings and entities (by section)
- 3.0  SOCIAL SECURITY
  - 3.1 INSTITUT NATIONAL DE SÉCURITÉ SOCIALE (INSS)
  - 3.2 MUTUELLE DE LA FONCTION PUBLIQUE (MFP)
  - 3.2 OFFICE NATIONAL DES PENSIONS ET RISQUES (ONPR)
- 4.0  LOCAL GOVERNMENTS/ COMMUNE (selected items shown in source: 4.1 through 4.119)
- 5.0  PUBLIC NON-FINANCIAL CORPORATIONS/ENTREPRISES PUBLIQUES NON FINANCIERES (selected)
  - 5.1.1 SOCIETE SUCRIERE DU MOSO (SOSUMO)
  - 5.1.2 SOCIÉTÉ RÉGIONALE DE DÉVELOPPEMENT DE L'IMBO (SRDI)
  - 5.1.3 AUTORITÉ DE L'AVIATION CIVILE DU BURUNDI (AACB)
  - 5.1.4 BURUNDI AIRLINE
  - 5.1.6 SOCIÉTÉ HÔTELIÈRE ET TOURISTIQUE DU BURUNDI (SHNB)
  - 5.1.19 RÉGIE DE PRODUCTION ET DE DISTRIBUTION D’EAU ET D’ELECTRICITÉ (REGIDESO)
  - 5.1.20 RÉGIE NATIONALE DES POSTES (RNP)
  - 5.1.21 OFFICE POUR LE DEVELOPPEMENT DU CAFE DU BURUNDI (ODCA)
  - 5.1.22 OFFICE DU THE DU BURUNDI (OTB) NFCP

### Annex II. Social Spending — definitions and scope (verbatim points from source)
- 1. This Annex describes social spending for program purposes. Public social expenditure is defined as central government expenditure on social protection, education, and health from the budget lines specified in Annex II.Table 1. These expenditures are recorded on a cash basis.
- 2. Public spending on social protection is defined as expenditure on social insurance and social assistance. Social insurance aims to protect households against shocks that may negatively impact their income and welfare and is usually financed by contributions or social charges. Social insurance is financed by pension contributions (pension contributions, sickness and maternity leave, unemployment). Social assistance aims to protect households from poverty and is financed by government revenues. It is important to note that some government subsidies can be considered social protection, insofar as they are oriented towards a universal transfer to households.
- 3. Public spending on education is all the expenditures that the Government allocates to the primary, secondary and university education sector, including scholarships and internships that the Government of Burundi grants to students, operating costs for training and development centers (“CFP”) as well as teachers' salaries.
  - Public spending on health is all the expenditure that the government allocates to the operation of hospitals (hospital grants), vaccination programs, the production of medical and pharmaceutical products, the fight against epidemics, and the remuneration of healthcare personnel

### Annex II. Table 1 — list of budget lines used for estimation (sample lines from the table)
- 40000010042218011000042401
- 12000050016161011000011501
- 14000230016116011000012101
- 40000010042218011000042402
- 12000090016116011000011501
- 14000230016126011000012101

*Source: 1bdiea2023001 - 2.10  COMMISSION NATIONALE SCIENCE, TECHNOLOGIE ET INNOVATION*

### Annex II. Table 1. Burundi: List of Budget Lines Used for the Estimation of Social Spending

### Annex II. Table 1. Burundi: List of Budget Lines Used for the Estimation of Social Spending

### Budget lines (continued)

- 12000020016161011000011501 14000190016161011000012101 20000020016126011000011501
- 12000030016116011000011501       14000190016162011000012101         20000020016161011000011501
- 12000030016161011000011501 14000200016116011000012101 20000020016162011000011501
- 12000040016116011000011501       14000200016126011000012101         20000030016116011000011501
- 12000040016161011000011501 14000200016161011000012101 20000030016126011000011501
- 12000050016116011000011501       14000200016162011000012101         20000030016161011000011501
- 20000030016162011000011501 32000060016161011000096901 32000290076611011000098203
- 20000040016116011000011501       32000060016162011011000096901         32000290076611011000098202
- 20000040016126011000011501 32000070016116011000098201 32000290076611011000098201
- 20000040016161011000011501       32000070016126011000098201         32000290076611011000098204
- 20000040016162011000011501 32000070016161011000098201 32000310016116011000094201
- 20000050016116011000011501       32000070016162011000098201         32000310016126011000094201
- 20000050016126011000011501 32000070026268011000098201 32000310016161011000094201
- 20000050016161011000011501       32000070026317011000098201         32000310016162011000094201
- 20000050016162011000011501 32000080016116011000098201 32000320016116011000095101
- 20000060016116011000011501       32000080016161011000098201         32000320016126011000095101
- 20000060016161011000011501 32000080026212011000098201 32000320016161011000095101
- 20000070016116011000011501       32000080026216011000098201         32000320016162011000095101
- 20000070016161011000011501 32000080026255011000098201 32000340016116011000097101
- 20000080016116011000011501       32000080026317011000098202         32000340016126011000097101
- 20000080016161011000011501 32000080086732011000098201 32000340016161011000097101
- 20000090016116011000011501       32000080086732011000098202         32000340016162011000097101
- 20000090016126011000011501 32000090016116011000096901 32000340026216011000097101
- 20000090016161011000011501       32000090016161011000096901         32000350016116011000097101
- 20000090016162011000011501 32000090026216011000096902 32000350016126011000097101
- 20000100016116011000011501       32000090026317011000096901         32000350016161011000097101
- 20000100016161011000011501 32000100016116011000096901 32000350016162011000097101
- 20000110016116011000011501       32000100016126011000096901         32000360016116011000096501
- 20000110016161011000011501 32000100016161011000096901 32000360016126011000096501
- 20000160016116011000084101       32000100016162011000096901         32000360016161011000096501
- 20000160016126011000084101 32000120016116011000097101 32000360016162011000096501
- 20000160016161011000084101       32000120016126011000097101         32000370016116011000098401
- 20000160016162011000084101 32000120016161011000097101 32000370016126011000098401
- 20000170016116011000084201       32000120016162011000097101         32000370016161011000098401
- 20000170016126011000084201 32000120026212011000097101 32000370016162011000098401
- 20000170016161011000084201       32000120076611011000097101         32000370086731011000096501
- 20000170016162011000084201 32000130016116011000097101 32000380016116011000098401
- 20000230016116011000085301       32000130016126011000097101         32000380016161011000098401
- 20000230016126011000085301 32000130016161011000097101 32005040042710011000075401
- 20000230016161011000085301       32000130016162011000097101         33000010016116011000071101
- 20000230016162011000085301 32000130026212011000097101 33000010016126011000071101
- 20000270016116011000082101       32000130026216011000097101         33000010016161011000071101
- 20000270016126011000082101 32000130076611011000097101 33000010016162011000071101
- 20000270016161011000082101       32000130076611011000097102         33000010026255011000071101
- 20000270016162011000082101 32000140016116011000097101 33000010026258011000071101
- 20000310016116011000011501       32000140016126011000097101         33000010026316011000071102
- 20000310016161011000011501 32000140016161011000097101 33000010026316011000071103

- 20000320016116011000011501       32000140016162011000097101         33000010026316011000071101
- 20000320016161011000011501 32000140026216011000097101 33000010026321011000071107
- 20000330016116011000011501       32000140076620011000097101         33000010026321011000071106
- 20000330016161011000011501 32000150016116011000098201 33000010026321011000071105
- 20000340016116011000011501       32000150016126011000098201         33000010026321011000071103
- 20000340016161011000011501 32000150016161011000098201 33000010026321011000071101
- 21000010016116011000046101       32000150016162011000098201         33000010026321011000071102
- 21000010016126011000046101 32000150026216011000094201 33000010042011011000046501
- 21000010016161011000046101       32000150026278011000098201         33000010042011011000073201
- 21000010016162011000046101 32000170016116011000091901 33000010042145011000071105
- 21000020016116011000046101       32000170016126011000091901         33000010042145011000075204
- 21000020016161011000046101 32000170016161011000091901 33000010042145011000072306
- 21000060016116011000046501       32000170016162011000091901         33000010042680011000079101
- 21000060016161011000046501 32000170026216011000091901 33000011476611011836074902
- 32000010016116011000091901       32000170026317011000091901         33000011876611011910074901
- 32000010016126011000091901 32000180016116011000091901 33000010176611011871074901
- 32000010016161011000091901       32000180016126011000091901         33000010976611011833074901
- 32000010016162011000091901 32000180016161011000091901 33000010676611011831074901
- 32000010026212011000091902       32000180016162011000091901         33000011676611011828074901
- 32000010026212011000091901 32000190016116011000092101 33000010276611011904074101
- 32000010026322011000091901       32000190016161011000092101         33000010076611011000071104
- 32000010042143011869092101 32000200016116011000098301 33000011676611011913074901
- 32000010042143011868091901       32000200016126011000098301         33000010276611011873074901
- 32000010042143011867091901 32000200016161011000098301 33000011176611011824074901
- 32000010042148011000092101       32000200016162011000098301         33000010776611011878074901
- 32000011156532011863092201 32000210016116011000098601 33000011776611011839074901
- 32000010056532011864092201       32000210016161011000098601         33000010076611011870075901
- 32000010076611011869095201 32000210026322011000098601 33000010376611011876074901
- 32000010076611011000094202       32000210076620011000098603         33000010876611011823074901
- 32000010876611011909094401 32000210076620011000098601 33000011376611011817074901
- 32000010076611011868095201       32000210076620011000096905         33000010076611011039079101
- 32000010076611011000094201 32000210076620011000098604 33000010476611011842074901
- 32000010076611011867095201       32000220016116011000097101         33000011476611011836074901
- 32000010076611011000094106 32000220016161011000097101 33000011276611011000074901
- 32000010076611011816094101       32000220026317011000096901         33000010276611011914074901
- 32000010076611011000094102 32000230076620011000098201 33000010976611011814074901
- 32000010076611011000094203       32000240016116011865046101         33000010676611011822074901
- 32000010076640011028094101 32000240016126011865046101 33000011576611011885074901
- 32000010076641011000094201       32000240016161011865046101         33000010376611011901074102
- 32000010076641011028094202 32000240016162011865046101 33000010076611011000071103
- 32000020016116011000091901       32000250016116011000098301         33000011576611011915074901
- 32000020016126011000091901 32000250016126011000098301 33000010276611011843074901
- 32000020016161011000091901       32000250016161011000098301         33000011076611011834074901
- 32000020016162011000091901 32000250016162011000098301 33000010776611011841074901
- 32000030016116011000096901       32000250026216011000095201         33000011776611011829074901
- 32000030016126011000096901 32000250076611011000098201 33000010076611011844074901
- 32000030016161011000096901       32000260016116011000098601         33000010376611011875074901

- 32000030016162011000096901 32000260016126011000092201 33000011276611011835074901
- 32000040016116011000096901       32000260016161011000098601         33000010776611011886074901
- 32000040016126011000096901 32000260016162011000092201 33000010076611011908071101
- 32000040016161011000096901       32000270016116011000096901         33000010076611011896071101
- 32000040016162011000096901 32000270016126011000092301 33000010476611011840074901
- 32000050016116011000096901       32000270016161011000096901         33000011476611011826074901
- 32000050016126011000096901 32000270016162011000092301 33000010376611011900074901
- 32000050016161011000096901       32000270076611011000092301         33000010076611011000071106
- 32000050016162011000096901 32000290016116011000098201 33000010576611011830074901
- 32000050026317011000096901       32000290016126011000098201         33000011576611011837074901
- 32000060016116011000096901 32000290016161011000098201 33000010076611011000071102
- 32000060016126011000096901       32000290016162011000098201         33000011876611011912074901
- 33000010176611011892074901 33000210016126011000071101 40000030016161011000042401 42000050016161011000044101
- 33000011076611011815074901       33000210016161011000071101         40000030016162011000042401         42000050016162011000044101
- 33000010776611011832074901 33000210016162011000071101 40000040016161011000042401 42000060016161011000042301
- 33000011676611011893074901       33000220016116011000071101         40000050016161011000042401         42000060016162011000042301
- 33000010176611011903074101 33000220016126011000071101 40000050016162011000042401 42000070016161011000043601
- 33000010076611011808075201       33000220016161011000071101         40000060016161011000042401         42000070016162011000043601
- 33000010376611011874074901 33000220016162011000071101 40000070016161011000042401 42000080016161011000066101
- 33000011276611011825074901       33000530076611011016075901         40000070016162011000042401         42000090016161011000066101
- 33000010776611011880074901 33000540076620011000076101 40000080016161011000042401 42000090016162011000066101
- 33000010076611011000074101       33000550076620011000075901         40000080016162011000042401         42000100016161011000066101
- 33000010076611011895074901 33000560076620011000075501 40000100016161011000042701 42000100016162011000066101
- 33000010476611011820074901       33000570076620011000076201         40000100016162011000042701         42000110016161011000042101
- 33000011376611011884074901 33000580076620011000077101 40000110016161011000042701 42000110016162011000042101
- 33000010576611011821074901       33000590076620011000075601         40000110016162011000042701         45000010016161011000066101
- 33000011576611011827074901 33000600076620011000075901 40000120016161011000042701 45000010016162011000066101
- 33000010076611011000071101       33000610076620011000075901         40000120016162011000042701         45000020016161011000044401
- 33000010376611011911074901 33000620076620011000075401 40000130016161011000042401 45000030016161011000044401
- 33000010176611011872074901       33000630076611011000075901         40000130016162011000042401         45000040016161011000044401
- 33000010976611011881074901 33000640076611011000075901 40000140016161011000042401 45000050016161011000044401
- 33000010776611011813074901       33005010042710011000071102         40000140016162011000042401         45000190016161011000044401
- 33000011676611011838074901 33005020042710011000076101 40000150016161011000042401 45000200016161011000044401
- 33000010276611011902074102       33005040042710011000076101         40000150016162011000042401         45000210016161011000044401
- 33000010076611011804075601 33005350042710011000071101 40000160116161011000042401 45000220016161011000044401
- 33000010376611011819074901       35000010016116011000101901         40000160116162011000042401         45000230016161011000044401
- 33000011176611011845074901 35000010016126011000101901 40000170316161011000042401 45000240016161011000044401
- 33000010776611011879074901       35000010016161011000101901         40000180116161011000042401         74000010016161011000033901
- 33000011776611011891074901 35000010016162011000101901 40000180116162011000042401 74000010016162011000033901
- 33000010076611011894074901       35000010026255011000101902         40000190316161011000042401         01000010066721011000101301
- 33000010476611011818074901 35000010026312011000101902 40000190316162011011000042401 05000010066721011000011101
- 33000011376611011883074901       35000010026315011000101901         40000200416161011000042401         06000010066721011000011101
- 33000010076611011898074901 35000010042121011000101903 40000200416162011000042401 07000010066721011000011401
- 33000010076611011000071105       35000010042121011000101901         40000210516161011000042401         19000030066721011000013101
- 33000010476611011877074901 35000010042145011000101903 40000210516162011011000042401 33000010042148011000071101
- 33000010076620011000071101       35000010042145011000101902         40000220616161011000042401         33000010042122011000074901

- 33000010076620011000071102 35000010066728011000109101 40000220616162011000042401 33000010042122011907074901

- 33000010076662011000071103       35000010076611011000101904         40000230716161011000042401         33000010042122011000074908
- 33000010086734011000074901 35000010076611011000101910 40000230716162011000042401 11000230042143011000031101
- 33000010086734011000077101       35000010076611011882102201         40000240816161011000042401         32000010042123011000092201
- 33000010086735011000071101 35000010076611011000101913 40000240816162011000042401 32000010042125011000092101

- 33000020016116011000071101       35000010076611011000109103         40000250916161011000042401         32000410042122011000094201
- 33000020016126011000071101 35000010076611011807102201 40000250916162011011000042401 32000420042122011000094101
- 33000020016161011000071101       35000010076611011806102201         40000261016161011000042801         33000650042145011000075201
- 33000020016162011000071101 35000010076611011000101911 40000261016162011000042801 40000010042121011000061101
- 33000030016116011000071101       35000010076611011000101905         40000271116161011000042401         42000010042137011000043404
- 33000030016126011000071101 35000010076611011035109101 40000271116162011011000042401

- 33000030016161011000071101       35000010076611011882102202         40000281216161011000042801

- 33000030016162011000071101 35000010076620011000101901 40000281216162011011000042801

- 33000060016116011000071101       35000010086735011000101902         40000291316161011000042801

- 33000060016161011000071101 35000010086735011000102801 40000291316162011000042801

- 33000070016116011000071101       35000010086735011000105106         40000301416161011000042101

- 33000070016126011000071101 35000010086738011000101901 40000301416162011000042401

- 33000070016161011000071101       35000020016116011000101901         40000311516161011000042401

- 33000070016162011000071101 35000020016126011000101901 40000311516162011000042401

- 33000070026321011000071101       35000020016161011000101901         40000321616161011000042401

- 33000070076611011000071101 35000020016162011000101901 40000321616162011000042401

- 33000080016116011000071101       35000030016116011000101901         40000331716161011000066101
- 33000080016126011000071101 35000030016126011000101901 40000331716162011000066101
- 33000080016161011000071101       35000030016161011000101901         40000341816161011000042101
- 33000080016162011000071101 35000030016162011000101901 40000350016161011000066101

- 33000090016116011000071101       35000040016116011000101901         40000360016161011000066101
- 33000090016126011000071101 35000040016126011000101901 40000370016161011000066101
- 33000090016161011000071101       35000040016161011000101901         40000380016161011000066101
- 33000090016162011000071101 35000040016162011000101901 40000390016161011000042401
- 33000090026317011000071101       35000040076611011000101901         40000410016161011000042401
- 33000090076620011000092201 35000050016161011000105101 40000430016161011011000042101
- 33000090086732011000071101       35000050016162011000105101         40000430016162011000042101
- 33000100016116011000071101 35000060016161011000109101 40000440016161011000042101
- 33000100016126011000071101       35000060016162011000109101         40000440016162011000042101
- 33000100016161011000071101 35000070016161011000109101 40000450016161011000042101
- 33000100016162011000071101       35000070016162011000109101         40000460016161011000042701
- 33000100026321011000071101 35000080016161011000109101 40000460016162011000042701
- 33000110016116011000071101       35000080016162011000109101         41000010016161011000047101
- 33000110016126011000071101 35000090016161011000109101 41000010016162011000047101
- 33000110016161011000071101       35000090016162011000109101         41000010076611011000047103
- 33000110016162011000071101 35000090076611011000109101 41000020016161011000047101
- 33000120016116011000071101       35000100016161011000109101         41000020016162011000047101
- 33000120016126011000071101 35000100016162011000109101 41000030016161011000047101
- 33000120016161011000071101       35000110016161011000109101         41000030016162011000047101
- 33000120016162011000071101 35000110016162011000109101 41000040016161011000047201
- 33000130016116011000071101       35000120016161011000109101         41000040016162011000047201
- 33000130016126011000071101 35000130016161011000109101 41000050016161011000044101
- 33000130016161011000071101       35000130016162011000109101         41000050016162011011000044101

*Annex II. Table 1. Burundi: List of Budget Lines Used for the Estimation of Social Spending (continued).*

### Annex II. Table 1. Burundi: List of Budget Lines Used for the Estimation of Social Spending

### Annex II. Table 1. Burundi: List of Budget Lines Used for the Estimation of Social Spending

### Budget lines used for the estimation of social spending
- 33000130016162011000071101 35000120016162011000109101 41000060016161011000044101
- 33000140016116011000071101 35000130016161011000109101 41000060016162011000044101
- 33000140016161011000071101 35000130016162011000109101 41000070016161011000044101
- 33000150016126011000071101 35000130076611011000109101 41000070016162011000044101
- 33000150016162011000071101 35000140016161011000109101 41000080016161011000047601
- 33000170016116011000071101 35000140016162011000109101 41000080016162011000047601
- 33000170016126011000071101 35000150016161011000109101 41000090016161011000046501
- 33000170016161011000071101 35000150016162011000109101 41000090016162011000046501
- 33000170016162011000071101 35000160016161011000109101 41000100016161011000047601
- 33000180016116011000071101 35000160076611011000109101 41000100016162011000047601
- 33000180016126011000071101 35000170016161011000109101 41000110016161011000045901
- 33000180016161011000071101 35000180016161011000109101 41000110016162011000045901
- 33000180016162011000071101 35005020042710011000109101 41000120016161011000045101
- 33000200016116011000071101 35005090042710011000101901 41000120016162011000045101
- 33000200016126011000071101 40000010016161011000042401 41000130016161011000045401
- 33000200016161011000071101 40000010016162011000042401 41000130016162011000045401
- 33000200016162011000071101 40000020016161011000042401 42000010016161011000043601
- 33000210016116011000071101 40000020016162011000042401 42000010016162011000043601

### Supplementary information highlights (Request for a 38-month Arrangement under the Extended Credit Facility — Supplementary Information)
- The supplement provides information available since the issuance of the Staff Report for the Request for an Arrangement under the Extended Credit Facility (EBS/23/78) issued on June 30, 2023; the additional information does not alter the thrust of the staff appraisal.
- All three prior actions have been met:
  - The external audit of net international reserves (NIR) was validated by the Banque de la Republique du Burundi (BRB) on June 16, 2023, and the report has been transmitted to staff.
  - The 2023/24 budget law containing two articles (Articles 11 and 15) giving the BRB full authority on FX management-related regulations was promulgated on June 28, 2023.
  - The BRB issued a communique on July 3, 2023 raising the 7-day refinancing rate to 10 percent.
- A structural benchmark measure was not met:
  - The measure on the completion of a study by end-June 2023 on the annual budgetary impact of multi-year contracts signed by some line ministries was not completed by end-June 2023.
  - The authorities accounted for the budgetary impact of multi-year contracts in the FY2023/24 budget approved by Parliament on June 12, 2023.
  - The authorities plan to finalize the study on July 14, 2023; an initial assessment shows that only one multi-year contract will have an impact beyond FY23/24.
- Approved by Costas Christou (AFR) and Eugenio Cerutti (SPR); prepared by the African Department in consultation with the Strategy, Policy, and Review Department; July 14, 2023.

### Debt Sustainability Analysis (Joint Bank-Fund DSA) — key findings
- Risk ratings:
  - Risk of external debt distress: High
  - Overall risk of debt distress: High
  - Granularity in the risk rating: Sustainable
  - Application of judgment: No
- Main DSA conclusions:
  - The DSA assesses Burundi at high risk of external and overall debt distress, unchanged from the July 2022 DSA.
  - All four external debt burden indicators breach their thresholds under the baseline, signaling a high risk of external debt distress.
  - The ratios of the PV of debt to GDP, PV of debt to exports and debt service to revenue under the baseline fall below their threshold in the medium term.
  - The ratio of external debt service to exports under the baseline remains close to its threshold.
  - The PV of the public debt-to-GDP ratio under the baseline is above the benchmark in the near-to-medium term, implying high risk of overall public debt distress; the indicator is on a declining trend and falls below its benchmark in the medium-to-long term.
- Stress tests:
  - Largest deterioration in external debt burden indicators results from shocks to exports and a combination of shocks to growth, primary balance, exports, non-debt flows and the exchange rate.
  - Largest deterioration in overall debt burden indicators results from shocks to combined contingent liabilities.
- Mitigating factors and caveats:
  - Staff assesses Burundi’s debt as sustainable based on the authorities’ commitment to reforms under the program including exchange rate reform, fiscal consolidation, and structural and governance reforms, and a positive macroeconomic outlook, including robust exports and GDP growth.
  - Mitigating factors include: (i) rebased GDP series (release planned for 2023) may result in an upward shift in nominal GDP; and (ii) higher exports and remittances under the impulse of the Exchange Rate (ER) realignment would alleviate external liquidity constraints.
  - Modified sustainability indicators accounting for these mitigating factors converge towards their respective thresholds at the end of the horizon period.
  - Significant risks remain: delays in reforms, potential information gaps on arrears, and a prolonged Russia's war in Ukraine would heighten debt vulnerabilities.
  - Further availability of grants and concessional loans to finance high-return projects, as donor operations scale up with re-engagement, would be beneficial.

- Approved by Costas Christou and Boileau Loko (IMF) and Manuela Francisco and Asad Alam (IDA); June 30, 2023.

### Background: public debt coverage, contingent liabilities, and recent developments
- Public debt coverage:
  - Public debt coverage includes the external and domestic debt of the central government (Text Table 1).
  - Data limitations prevent expanding public debt coverage to other entities of the general government or State-Owned Enterprises (SOEs).
  - Contingent external liabilities from subnational government entities and SOEs are limited because they cannot borrow externally without a government guarantee.
  - Central bank debt is excluded from coverage, except those amounts borrowed on behalf of the government (IMF loans). External debt is based on residency.
- Improvements in public debt transparency and coverage:
  - Authorities are gradually improving public debt coverage; latest Public Debt Management Report published in May 2023 presents preliminary debt data at end-2022 of twenty-four (24) SOEs (BIF 1295.0 billion or 16.2 percent of GDP).
  - The debt report also includes domestic arrears identified at end-2022 (BIF 103.9 billion or 1.3 percent of GDP).
  - An ordinance signed by the Minister of Finance institutionalizes annual publication of debt reports within six months of the end of the reporting period to include information on all SOE debt and domestic arrears.
- Contingent liabilities stress test assumptions (Text Table 2):
  - Potential domestic arrears assumed to amount to 3 percent of GDP at end-2022.
  - Contingent liabilities on SOEs’ debt set at 17 percent of GDP to cover fiscal risks from SOEs’ weak reporting and domestic arrears.
  - Financial market contingent liabilities set at the default value of 5 percent of GDP (about 7 percent of Burundi’s commercial banks’ liabilities).
  - Overall, total contingent liabilities assumed at 25 percent of GDP, up from 11.1 percent of GDP in the previous DSA.
- Debt developments:
  - Public debt increased somewhat in 2022 as the increase in domestic debt more than offset the decline in external debt.
  - Domestic debt increased from 46.3 percent of GDP in 2021 to 48.4 percent of GDP at end-2022, mainly because of the strong increase in debt to the central bank.
  - External debt moderately declined from 20.2 percent of GDP at end-2021 to 19.9 percent of GDP at end-2022 as the decline in multilateral loans was partly offset by the increase in bilateral loans.
  - Total public debt rose from 66.6 percent of GDP at end-2021 to 68.4 percent of GDP at end-2022.
- Historical and fiscal context:
  - Donor aid fell from 8.9 percent of GDP to 2.4 percent of GDP over 2014–16 following the 2015 political and security crisis.
  - Growth stood at 1.8 percent in 2019; fiscal deficits averaged 6.5 percent of GDP a year during 2015–19 and were 6 percent of GDP in FY 2019/20 (July–June).

*Source: Annex II. Table 1. Burundi: List of Budget Lines Used for the Estimation of Social Spending; Supplementary Information and Joint Bank-Fund Debt Sustainability Analysis (excerpts) from the provided document.*

### 7.6   percent of GDP in FY2020/21). The deficits have been financed mainly by borrowing from the central

### 1bdiea2023001 - 7.6   percent of GDP in FY2020/21). The deficits have been financed mainly by borrowing from the central

### External debt composition and arrears
- Burundi owes most of its external debt to multilateral and regional lenders, including the IMF, World Bank, AfDB, and International Fund for Agricultural Development (IFAD).
- Regional lenders to the central government include the EU, Arab Bank for Economic Development in Africa (BADEA), and the OPEC Fund for Development.
- Bilateral creditors of the central government include China and India (through their Exim Banks), and Saudi Arabia, Kuwait, and Abu Dhabi (through their Funds for Development).
- Burundi owes arrears to Libya (US$ 4.64 million at end-2022 or 0.12   percent of GDP); these arrears continue to be deemed away under the policy on arrears to official bilateral creditors.
- Contribution arrears to international organizations total US$ 90.1 million at end-2022 or 2.3 percent of GDP; the DSA assumes no interest on this obligation and payment down at a rate of US$ 2 million per year starting in 2024.
- An external loan of the telecommunication company ONATEL (US$ 17.9 million at end-2022 or 0.5 percent of GDP) guaranteed by the government has been added to the stock of external debt.
- Burundi has not accessed private external capital markets.
- Burundi’s outstanding external debt at end-2022 retains a grant element of 9 percent.

### External debt stock (selected figures as reported)
- Total external debt (end-2021): 667.3 (Millions of US dollars) — 20.2 percent of GDP.
- Total external debt (end-2022): 769.7 (Millions of US dollars) — 19.9 percent of GDP.
- Multilateral (2021): 477.5 (Millions of US dollars) — 14.5 percent of GDP.
- Multilateral (2022): 468.2 (Millions of US dollars) — 12.1 percent of GDP.
- World Bank (IDA) (2021): 132.2 (Millions of US dollars) — 4.0 percent of GDP.
- World Bank (IDA) (2022): 121.7 (Millions of US dollars) — 3.2 percent of GDP.
- IMF (2021/2022): 94.9 / 81.6 (Millions of US dollars) — 2.9 / 2.1 percent of GDP.
- Bilateral (2021): 189.8 (Millions of US dollars) — 5.8 percent of GDP.
- Bilateral (2022): 301.5 (Millions of US dollars) — 7.8 percent of GDP.
- Libya arrears (end-2022): US$ 4.64 million — 0.12   percent of GDP.
- Contribution arrears to international organizations (end-2022): US$ 90.1 million — 2.3 percent of GDP.
- ONATEL guaranteed loan (end-2022): US$ 17.9 million — 0.5 percent of GDP.
- Debt service treatment note: Debt to the IMF contracted in 2021 is serviced by the Ministry of Finance; other debt to the IMF is serviced by the central bank (BRB).

### Macroeconomic forecast - growth
- Baseline assumes a rebound in growth in 2023 and continuation over the medium term, supported by public investment.
- Real GDP growth projections:
  - 2023: 3.3 percent
  - 2024: 6 percent
  - Medium term: stabilize around 5.7 percent
- Growth drivers identified:
  - Agrarian measures: program of public lands allocation to cooperatives and private investors; program of improved quality seeds distribution by ISABU.
  - Expansion of local fertilizer production: FOMI creating two new factories increasing fertilizer supply in the second half of 2023.
  - Exchange rate reform effects, early reforms including new mining code, adoption of program budgeting.
  - Ongoing public and donor investment projects, mining production under new mining code and renegotiated contracts, buoyant services, stronger agricultural production, increased resilience to climate shocks, group lands for economies of scale, improved financial inclusion.
  - Programmed policy, governance, and structural reforms; planned use of SDR allocation to scale up public investment; lower import restrictions.
- Assumption: limited external financing flows.

### Inflation outlook
- Inflation projections:
  - 2023: 20.1 percent (period average)
  - 2024: 16.1 percent (average)
  - Medium term: inflation contained due to initiatives to boost agricultural production and import substitution policies.
- Drivers and mitigating measures:
  - High 2023 inflation is a legacy of domestic and external shocks on food and fuel prices.
  - Authorities’ initiatives include targeted tax breaks, sales of cereal security stocks below market prices, and reduction of the monetary policy impulse of 2022.

### External sector and reserves
- ER reform and FX market liberalization are expected to stimulate exports and remittance inflows.
- External capital flows mainly from donors (project grants) and private investors (mainly trade credits) projected to remain important for balance of payments financing.
- Official reserves buildup projections:
  - End-2023: US$ 239.7 million — 1.9 months of imports.
  - Medium term: close to 3.5 months of imports.
- Trade credits:
  - Historical average (2017–22): 7.3 percent of GDP.
  - Projection (2023–43): less than 5 percent of GDP per year on average.

### Changes since July 2022 DSA (high-level)
- Real sector:
  - Real GDP growth revised downward for 2023 by 0.8 percentage points and upward for 2024 by 1.1 percentage points.
  - Revisions reflect negative impact of the war in Ukraine on prices and global demand in 2023 offsetting positive impact of ER reform and prospective ECF loan; upward revision starting in 2024 due to expected ECF-supported reforms and financing.
- Fiscal sector:
  - Revenue projections slightly lower (about 3 percentage points of GDP per year for the 2023-28 period) than in the July 2022 DSA mainly because of a higher nominal GDP path (on average about 40 percent higher each year during the 2023-28 period).
  - Project grants are higher in the medium term mainly because of the impact of the ER reform on the BIF value of these grants.
  - Current spending is lower in the medium term mainly because of the increase in nominal GDP.
  - Total public investment is higher mainly because of the impact of the ER reform on the BIF value of foreign-financed investment and higher domestically financed investment.
  - Projected fiscal deficit path marginally better than July 2022 DSA.
  - Projected primary fiscal balance:
    - Annual average -3 percent of GDP during 2020–25.
    - Annual average -0.6 percent of GDP during 2026–42.
  - Baseline assumes significant fiscal adjustment starting in FY2024 mainly because of expected resumption of budget support and a strong decline in “other expense” (COVID-19 and fertilizer subsidies).
  - Spending on wages, goods and services and transfers expected to remain contained to provide room for domestically financed public investment.

### Selected macroeconomic indicator comparators (excerpted values)
- Real GDP growth (Current DSA):
  - 2020: 3.4
  - 2021: 5.1
  - 2022: 0.3
  - 2023: 3.1
  - 2024: 1.8
  - 2025: 3.3
  - Average 2020-25: 3.3
  - Average 2026-42: 6.0
- CPI (period average, Current DSA):
  - 2020: 13.5
  - 2021: 10.1
  - 2022: 7.3
  - 2023: 8.3
  - 2024: 18.9
  - 2025: 20.1
  - Average 2020-25: 10.1
  - Average 2026-42: 16.1
- Primary fiscal balance (percent of GDP, Current DSA):
  - 2020: -3.0
  - 2021: -0.6
  - 2022: -3.1
  - 2023: -4.7
  - 2024: -4.2
  - 2025: -6.4
  - Average 2020-25: -3.0
  - Average 2026-42: -0.6
- Non-interest current account balance (percent of GDP, Current DSA):
  - 2020: -14.9
  - 2021: -14.8
  - 2022: -10.1
  - 2023: -12.3
  - 2024: -15.4
  - 2025: -16.9

### Revenue measures (selected measures by budget year)
- Key measures of the 2021/22 Budget:
  - A new tax on mobile phone megabits (18 percent of the cost).
  - Non-exemption from income tax and VAT on sales made by companies.
  - A new anti-pollution tax on imported used vehicles.
  - A new road fee.
  - Widening of the rental tax base to include land leases.
  - Strengthening tax collection from mining sector activities.
  - Strict enforcement of dividend collection from public enterprises.
- Key measures of the 2022/23 Budget (selected):
  - VAT deduction or reimbursement conditional on verification of supplier VAT payment.
  - Elimination of exemptions from direct and indirect taxation except as defined by laws, international conventions, treaties and contracts.
  - Increase in various customs and administrative fees; an ad valorem tax of 1.5 percent on all imports (except those exempted).
  - Introduction of an annual fee for renewal of temporary admissions for vehicles, motorcycles or other items in the temporary admission regime.
  - A new special contribution of five percent (5 percent) of the customs value for some vehicles; another special contribution of five percent (5 percent) of acquisition value for buildings with market value equal to or greater than five hundred million Burundian francs.
  - A fifteen percent (15 percent) withholding applied to some payments made by residents, including tax-exempt persons.
  - A flat-rate levy on income earned by intermediaries in mobile money transfer operations.
  - A tax of ten percent (10 percent) applied on rates applied by notaries and lawyers on behalf of the Treasury.
  - Changes in excise and ad valorem taxes on vehicles, beer, liquors, wines, lubricants, and a switch to specific taxation on cigarettes.
- Key measures of the 2023/24 Budget (selected):
  - Strengthening of VAT reimbursement controls: to be eligible the VAT must appear on an electronic invoice sent to the EBMS at time of establishment.
  - A new service consumption tax on hotels (5 percent), payable by clients and collected monthly by hotels.
  - A new tax (8 percent) on financial services; VAT on financial services abolished; specific 5 percent contribution payable by financial institutions abolished.
  - New taxation regime for natural persons with businesses: turnover ≤ BIF 25,000,000 annually subject to quarterly tax declaration at single rate of 0.3 percent of quarterly turnover; persons with annual turnover > BIF 25,000,000 must file annual income tax declaration.
  - Increase in discharge tax for some businesses; revenue from renting government stands/shops to be transferred to OBR accounts with government giving 10 percent back to local governments.
  - New fees and taxes including importer/exporter code fee (BIF 50,000), fees for beverage outlet licenses, fee (BIF 10,000) for duplicate payment receipt/tax registration certificate printing initiated by beneficiary.
  - Increased specific tax on cigarettes; new building taxes; new wealth tax from acquisition of the third building.
  - Cost of Health Assistance Cards (CAM) unified to BIF 3000.
  - Cost of the tax stamp set in BIF at an amount equivalent to BIF 576.

### Fiscal financing and borrowing patterns
- Domestic borrowing is projected to finance most of the declining fiscal deficit going forward, though net external borrowing would remain and increase somewhat starting in 2027.
- External disbursements, including from the IMF and World Bank, financed COVID-related spending and recovery.
- Most external borrowing in 2022 was from multilateral and regional lenders (60 percent).
- Projected share of multilateral lenders:
  - Peaks at 87.9 percent in 2023 (during prospective ECF disbursements).
  - Declines to 48.6 percent in 2026.
  - Starts rising again to about 88.6 percent starting in 2034 under the DSA assumption of continued access to highly concessional financing.
- Projected multilaterals’ loan maturities: vary between 20 and 38 years.
- Projected multilaterals’ grant elements: vary between 27.5 percent to 53.7 percent.
- Non-Paris Club bilateral creditors are assumed to maintain lending with loan maturities varying from 20 to 30 years and grant elements varying between 29.8 and [text truncated in source].

*Source: IMF staff estimates and projections as reported in the provided content unit.*

### 49.4 percent.

### 1bdiea2023001 - 49.4 percent.

### Overview
- Burundi is subject to a ceiling of zero non-concessional external borrowing (NCB), which is also a PPA under the SDFP for FY21-FY23.
- The DSA assumes new borrowing consistent with the NCB to contain borrowing costs and mitigate external debt-related risks.
- Staff’s baseline projections of external disbursements are described as conservative and do not reflect the full potential of donor support.

### Fiscal projections and financing
- Domestic sources are projected to finance most of the fiscal deficit and deposit accumulation until FY2028.
- Starting with FY2027, net external borrowing picks up but would remain modest, less than 1 percent of GDP.
- Domestic financing is assumed to be in the form of:
  - central bank lending (mainly the SDR allocation),
  - treasury bills and bonds with maturities varying from less than one year to more than seven years,
  - interest rates varying from 2 to about 13.5 percent.
- Staff projection snapshots (percent of GDP) from the fiscal table (selected items and years as presented):
  - Revenue and grants: 1.1 (Est. 2021/22), 0.2 (2024/25), 0.1 (2035/36)
  - Tax revenue: -0.6 (2021/22), 0.4 (2023/24), 0.2 (2035/36)
  - Grants: 0.8 (2021/22), -2.7 (2024/25), -0.1 (2035/36)
  - Total expenditure: 0.5 (2021/22), -2.5 (2024/25), -0.1 (2035/36)
  - Net acquisition of nonfinancial assets: 2.9 (2021/22), -1.8 (2024/25), -0.1 (2035/36)
  - Net lending (+) / borrowing (-): 0.6 (2021/22), 4.4 (2022/23), 0.2 (2035/36)

### Staff projections of external disbursements (2023–33)
- Projected disbursements (Loans, Projects) — percent of GDP by year:
  - 2023: 5.3
  - 2024: 3.4
  - 2025: 2.7
  - 2026: 1.5
  - 2027: 1.5
  - 2028: 1.7
  - 2029: 1.7
  - 2030: 1.6
  - 2031: 1.4
  - 2032: 1.3
  - 2033: 1.2
- Multilateral loans (percent of GDP by year):
  - 2023: 4.7
  - 2024: 2.3
  - 2025: 1.7
  - 2026: 0.7
  - 2027: 0.8
  - 2028: 1.4
  - 2029: 1.4
  - 2030: 1.4
  - 2031: 1.2
  - 2032: 1.1
  - 2033: 1.0
- Of which: IMF (percent of GDP by year):
  - 2023: 4.1
  - 2024: 1.9
  - 2025: 1.6
  - 2026: 0.7
  - 2027–2033: - - - - - - - (no further IMF disbursements shown)
- Bilateral loans (percent of GDP by year):
  - 2023: 0.6
  - 2024: 1.2
  - 2025: 1.0
  - 2026: 0.8
  - 2027: 0.7
  - 2028: 0.3
  - 2029: 0.3
  - 2030: 0.2
  - 2031: 0.2
  - 2032: 0.2
  - 2033: 0.1
- Selected bilateral creditors (percent of GDP by year where reported):
  - India / EXIM Bank of India (EBI): 2023: 0.4; 2024: 0.9; 2025: 0.8; 2026: 0.7; 2027: 0.6; 2028: 0.2; 2029: 0.2; 2030: 0.1; 2031: 0.1; 2032: 0.1; 2033: 0.1
  - Saudi Arabia / Fonds Saoudien: 2023: 0.2; 2024: 0.2; 2025: 0.1; 2026: 0.1; 2027: 0.1; 2028: 0.1; 2029: 0.1; 2030: 0.1; 2031: 0.1; 2032: 0.0; 2033: 0.0
- Grants (Projects and budget support) — projected disbursements (percent of GDP by year):
  - 2023: 14.9
  - 2024: 16.9
  - 2025: 13.1
  - 2026: 11.3
  - 2027: 9.3
  - 2028: 6.9
  - 2029: 6.1
  - 2030: 4.9
  - 2031: 3.3
  - 2032: 2.7
  - 2033: 2.3
- Of which IDA grants (percent of GDP by year):
  - 2023: 4.7
  - 2024: 6.6
  - 2025: 5.8
  - 2026: 4.7
  - 2027: 4.4
  - 2028: 3.5
  - 2029: 3.1
  - 2030: 2.4
  - 2031: 1.2
  - 2032: 1.0
  - 2033: 0.9
- Memorandum items:
  - GDP at current market prices (in billions of US$): 2023: 3.2; 2024: 3.1; 2025: 3.4; 2026: 3.8; 2027: 4.2; 2028: 4.7; 2029: 5.1; 2030: 6.0; 2031: 7.5; 2032: 9.3; 2033: 10.9
  - Share of IMF disbmt in total loans (in percent): 77.8 (2023), 54.7 (2024), 58.9 (2025), 43.0 (2026), 0.0 (later years shown as 0.00)
  - Share of IMF disbmt in total loans and grants (in percent): 20.4 (2023), 9.3 (2024), 9.9 (2025), 5.1 (2026), 0.0 (later years shown as 0.00)

### Summary of Projected External Borrowing Program (Table 2 highlights)
- By sources of debt financing (USD million and percent; three column totals shown as identical in the table):
  - Total: 168.8 (100.0 percent) / 112.3 (100.0 percent) / 112.3 (100.0 percent)
- Concessional debt (percent of respective totals):
  - 17.3 (10.3 percent); 8.8 (7.9 percent); 8.8 (7.9 percent)
  - Multilateral: 8.9 (5.3 percent); 4.5 (4.0 percent); 4.5 (4.0 percent)
  - Bilateral: 8.5 (5.0 percent); 4.3 (3.9 percent); 4.3 (3.9 percent)
- Non-concessional debt (percent of respective totals):
  - 151.5 (89.7 percent); 103.4 (92.1 percent); 103.4 (92.1 percent)
  - Multilateral: 139.5 (82.6 percent); 95.0 (84.6 percent); 95.0 (84.6 percent)
    - o/w IMF: 131.3 (77.8 percent); 89.1 (79.4 percent); 89.1 (79.4 percent)
  - Bilateral: 12.0 (7.1 percent); 8.4 (7.5 percent); 8.4 (7.5 percent)
- By creditor type:
  - Multilateral: 148.3 (87.9 percent); 99.5 (88.6 percent); 99.5 (88.6 percent)
  - Bilateral: 20.5 (12.1 percent); 12.8 (11.4 percent); 12.8 (11.4 percent)
- Uses of debt financing:
  - Infrastructure: 37.5 (22.2 percent); 23.3 (20.6 percent); 23.3 (20.6 percent)
  - Other: 131.3 (77.8 percent); 89.1 (79.4 percent); 89.1 (79.4 percent)
- Memo items: Indicative projections Year 2: 105.1; Year 3: 90.6 (values presented without further context)

- Note on program definition: For program purposes, non-concessional external borrowing excludes:
  - (i) the use of IMF resources;
  - (ii) lending by the World Bank and the African Development Bank;
  - (iii) any BIF-denominated treasury bill and government bond holdings by nonresidents;
  - (iv) disbursements under loan contracts signed before December 31, 2022.

### Medium-to-Long Term Macroeconomic Forecasts (Box 1)
- Growth projections and drivers:
  - Growth is expected to rise to around 5.7 percent in the medium term.
  - Growth estimated at 1.8 percent in 2022; projected to increase to around 6 percent by 2024.
  - Long-term stabilization around 5 percent.
  - Drivers: public and donor investment projects, mining production under a new mining code and renegotiated contracts, buoyant service activities supported by ER reform, stronger agricultural production (improved seed and fertilizer availability), increased resilience to climate shocks, group lands economies of scale, and improved financial inclusion.
  - Projected long-term growth under the baseline: 5.1 percent (noted as close to historical pre-crisis performance of 4.5 percent during 2006-2014).
- Inflation:
  - Projected to decline to about 10 percent in the medium-to-long term.
  - Food items represent 45 percent of the basket.
- Fiscal consolidation and public debt:
  - Total revenue expected to rise from 16.8 percent of GDP in FY2022/23 to above 18 percent of GDP in the long term.
  - Grants projected to average about 11.6 percent of GDP per year during 2023–28 (project grants boost from re-engagement), from 7.2 percent of GDP in FY2021/22, and to fall to about 1 percent of GDP in the long term.
  - Current spending projected to drop from 20.7 percent of GDP in FY2022/23 to about 14 percent of GDP in the long term.
  - Capital spending decreasing from about 14.4 percent of GDP in FY2022/23 to about 8 percent of GDP in the long term.
  - Fiscal balance improving from a deficit of about 8.9 percent of GDP in FY2022/23 to a deficit of 2.3 percent of GDP in 2032/33.
  - Public debt projected to peak in 2023 at 72.7 percent of GDP and decline thereafter.
- External sector and current account:
  - Exports rising from 5 percent of GDP in 2022 to about 14 percent of GDP in the long term.
  - Imports rising from 26.5 percent of GDP in 2022 to about 30 percent of GDP in the long term.
  - Trade deficit improving from 21.5 percent of GDP in 2022 to about 16 percent of GDP in the long term.
  - Transfers peaking at 19.3 percent of GDP in 2024, then declining to about 4 percent of GDP in the long term.
  - Current account deficit remains large in the medium and long term; financed mainly with project grants (averaging about 11 percent of GDP per year in the medium term before falling to less than 1 percent per year in the long term) and public and private sector borrowing, including trade credits (averaging about 5 percent of GDP per year during 2023–43).

- Additional program assumptions:
  - Central bank lending to the government related to the 2021 SDR allocation amounted to BIF 94.7 billion in 2022H2 (1 percent of FY2023 GDP).
  - Baseline assumes remainder of the BIF equivalent of the SDR allocation will be deposited in government accounts in installments in 2023Q2, 2023Q4, 2024Q2 and 2024Q4 and used gradually to help finance public investment.
  - Central bank advances treated like other central bank advances, reimbursed over time with interest rates varying between 2 and 12.7 percent.
  - Staff projections include the immediate impact of the agreement to build a $900 Million railway (24.5 percent of Burundi 2022 GDP), with assumed government spending of BIF 258 billion (2.8 percent of FY2023 GDP) in FY2023 and BIF 258 billion (2.3 percent of FY2024 GDP) in FY2024. The DSA does not assume further financing from Burundi tied to this project.

### Key risks, realism tools, and external debt sensitivity
- Realism tools highlight sensitivity of external debt to the current account deficit, which is mainly due to weak exports.
- Burundi’s large current account deficits have been financed mainly by project grants, public sector borrowing, and private non-FDI inflows (largely trade credits).
- FDI inflows have been modest.
- Even though the current account deficit is projected to remain large in the medium and long term, its financing would rely less on public sector borrowing in the long term, which would allow public external debt to decline in the context of fiscal consolidation.

*Source: Burundi authorities; and IMF staff estimates and projections.*

### 13.      Realism tools also highlight the sensitivity of total public debt to the primary fiscal deficit

### 13.      Realism tools also highlight the sensitivity of total public debt to the primary fiscal deficit

### Debt path and sensitivity to primary deficit and GDP growth
- The path of public debt in the near term in this DSA is slightly worse than the one in the July 2022 DSA mainly because of the path of public external debt; it is better in the medium to long term as IMF loans get paid down.
- July 2022 DSA projection: public debt to decline to 48.5 percent of GDP by end-2033 after peaking to 67.7 percent of GDP at end-2023.
- Current DSA baseline projection: debt relative to GDP is expected to peak to 72.7 percent of GDP at end 2023 and start on a gradual downward path, reaching 29.9 percent of GDP by end-2033, with contributions from lower fiscal deficits and GDP growth over the next five years being more favorable than in recent years.
- Note on external debt residuals: The large residuals for external debt in Table 3 and Figure 3 are mostly due to the fact that external debt is only central government external debt; the current account deficit is also financed with private borrowing, largely trade credits and unidentified private flows that are not captured in external debt.

### Realism tools: planned fiscal adjustment, consistency with growth, and public investment
- Realism of planned fiscal adjustment:
  - The projected fiscal adjustment over the next three years is in the top quartile for low-income countries.
  - It is supported by measures the authorities committed to implement in the context of the ECF arrangement, which should lead to improvement in revenue collection and donor support, the anticipated winding down of current expenditure related to COVID-19 and fertilizers, and the scaling up of public investment.
- Consistency between fiscal adjustment and growth:
  - Fiscal multipliers suggest the projected fiscal adjustment would have a larger impact on growth than currently assumed in the baseline.
  - The tool is not well suited to take account of the impact of the pandemic and the quality of the fiscal adjustment and reforms on growth.
  - The authorities are expected to implement growth-enhancing structural reforms in the context of the ECF arrangement.
- Consistency between public investment and growth:
  - The increase in public investment will clearly support projected growth, in a way similar to the July 2022 DSA.
  - Other factors, including private investment, will have a positive contribution to projected growth, much higher than the contribution projected in the July 2022 DSA.

### Risks to the outlook: upside and downside
- Upside risks:
  - A stronger resumption of mining projects would significantly strengthen the BOP, growth, and revenue collection.
  - Higher yield of recent revenue measures announced in the FY2021/22, FY2022/23 and FY2023/24 budgets would increase fiscal space and improve debt dynamics (Table 1).
  - Potentially larger-than-projected external financing reflecting the lifting of U.S. and E.U. sanctions and the proposed ECF arrangement, which could catalyze other flows.
  - Disbursements of grants and project loans could be larger than current staff projections, especially for the AfDB (Text Table 8) if project implementation accelerates.
  - Highly concessional long-term external financing would substitute for more expensive domestic financing, reducing borrowing cost and debt vulnerabilities; likely accompanied by an ambitious reform agenda supportive of stronger growth.
  - Grants averaged 17.7 percent of GDP per year during 2010–14 (before the 2015 political crisis), compared to about 11.6 percent assumed in the baseline medium-term projections. Budget support averaged 3 percent of GDP per year during 2010–14. The DSA assumes limited budget support (1.8 and 1.4 percent of GDP in FY2023/24 and FY2024/25 respectively and 0.5 percent of GDP after) starting in FY2024. Project grants are assumed to come mainly from the World Bank (until 2033), AfDB, EU and US.
  - Further flexibility in the exchange rate management and other reforms to support structural change and enhance competitiveness would improve the outlook.
- Downside risks:
  - Domestic risks: delays in implementing domestic policies underpinning the baseline, including significant fiscal consolidation; imprudent monetary policy that fails to keep inflation under control; delayed implementation of governance and growth-enhancing reforms under the NDP; and inadequate regulatory and supervisory provisions for financial sector stability.
  - A longer muddle-through exchange rate policy stance would amplify macroeconomic imbalances and raise risks to long-term growth.
  - External risks: stronger and longer spillovers from the war in Ukraine; natural disasters leading to higher domestic inflation; deterioration of the political and security situation; rising energy and food prices and borrowing costs following accommodative monetary policy unwinding by major central banks; weak global demand and investor confidence.

### Country classification, thresholds, and stress-test settings
- Debt-carrying capacity classification: Burundi’s debt-carrying capacity is classified as weak, as in the July 2022 DSA.
- Composite indicator (CI): 2.40, based on the April 2023 WEO data and 2021 CPIA scores (Text Table 9).
- Under weak debt-carrying capacity, applicable thresholds:
  - PV of debt-to-GDP ratio: 30 percent (for external debt threshold applicable) and PV of total public debt benchmark: 35 percent of GDP.
  - PV of debt-to-exports ratio: 140 percent.
  - Debt service-to-exports ratio: 10 percent.
  - Debt service-to-revenue ratio: 14 percent.
- Stress-test settings:
  - Standard settings used for bound tests and tailored tests on commodity prices.
  - Contingent liabilities stress test accounts for potential domestic arrears not yet identified or recognized and fiscal risks from SOE debt and the financial sector.
- Note: Burundi’s de jure exchange rate arrangement is floating, and its de facto exchange rate arrangement is crawl-like.

### External debt sustainability signals
- Overall risk of external debt distress: high.
- All four external debt burden indicators breach their thresholds under the baseline, signaling a high risk of external debt distress rating.
- The ratios of the PV of debt to GDP, PV of debt to exports and debt service to revenue under the baseline fall below their thresholds in the medium term.
- The PV of external debt to GDP only mildly breaches its threshold under the baseline.
- The ratio of external debt service to exports under the baseline remains close to its threshold until the end of the horizon mainly because of the repayment of loans from the IMF (2021 RCF loans and prospective ECF loans).
- Stress-test findings:
  - External debt sustainability is particularly vulnerable to shocks to exports and a combination of shocks to growth, primary balance, exports, non-debt flows (including transfers and FDI), and the exchange rate.
  - A shock to exports would result in large and protracted breaches of the thresholds for one debt burden ratio.
  - A combination of shocks to growth, primary balance, exports, non-debt flows, and the exchange rate would result in a large but temporary breach of the threshold for one debt burden ratio and a large and protracted breach for another debt burden ratio; this combination would increase the ratio of external debt service to revenue, which would nonetheless remain below its threshold in the medium term.

### Public debt sustainability signals
- Overall risk of debt distress: high.
- PV of public debt-to-GDP ratio breaches its threshold under the baseline scenario in the near to medium term.
- PV of public debt-to-GDP trajectory (baseline assumption of prudent fiscal policy and steady growth):
  - 75 percent in 2023.
  - Decreases to 29 percent in 2033 (below the 35 percent benchmark by 2032).
- The ratio of public debt service-to-revenues and grants is elevated:
  - Average of 37 percent per year during 2023-28.
  - Average of 46 percent during 2029-33.
- Stress-test findings:
  - Public debt sustainability is particularly vulnerable to shocks to contingent liabilities, growth, and commodity prices.
  - A standard shock to contingent liabilities, growth or to commodity prices would leave the PV of public debt-to-GDP ratio above the benchmark until the end of the DSA horizon.
- Judgment: Judgment is not applied to override the mechanical risk ratings.

### Staff assessment, mitigating factors, and policy implications
- DSA finding: Burundi is at high risk of external and overall debt distress based on mechanical risk signals; staff sees no reason to override these signals.
- Key vulnerabilities:
  - External debt system: shocks to exports and combinations of shocks to growth, primary balance, exports, non-debt flows (including transfers and FDI), and the exchange rate.
  - Public debt: shocks to contingent liabilities, growth, and commodity prices.
- Measures to address vulnerabilities:
  - Reforms to boost resilience, exports, and growth performance.
  - Strengthening of relations with donors and associated increase in financial support to reduce the need for, and facilitate, fiscal adjustment.
- Staff assesses Burundi’s debt as sustainable conditional on:
  - Authorities’ commitment to re-engagement with the international community.
  - Exchange rate reform.
  - Fiscal consolidation.
  - Expectations of donor financing.
  - A positive macroeconomic outlook including robust exports and GDP growth.
  - Rebasing of GDP (release planned for 2023), which could lead to an upward shift of GDP and improve debt sustainability indicators based on GDP.
- Additional mitigating factors:
  - Sustained remittance inflows lower effective risks associated with external debt liquidity indicators.
  - Higher exports and remittances under the impulse of the ER realignment would alleviate external liquidity constraints.
  - Modified sustainability indicators accounting for these mitigating factors converge towards their respective thresholds at the end of the DSA horizon.
- Operational note: Given the large share of domestic debt, roll-over risks are limited despite high overall debt service to revenue and gross financing needs in the near term; solvency debt indicators are declining and the realism tools and historical scenarios do not point to unrealistic macro assumptions.

*Source: 1bdiea2023001 - 13.      Realism tools also highlight the sensitivity of total public debt to the primary fiscal deficit*

### 25.      Staff's assessment of debt sustainability is subject to risks, including from domestic policies

### 1bdiea2023001 - 25.      Staff's assessment of debt sustainability is subject to risks, including from domestic policies

### Risks to the debt sustainability assessment
- Staff's DSA is subject to risks from domestic policies and the external environment, including:
  - Delays in fiscal consolidation.
  - Slow implementation pace of structural reforms to enhance competitiveness and boost exports and growth.
  - Information gap on arrears.
  - Heightened effects of the COVID-19 pandemic or war in Ukraine.
- Burundi's debt vulnerabilities are especially pronounced to:
  - Shocks to exports.
  - A combination of shocks to growth, primary balance, exports, non-debt flows (including transfers and FDI), the exchange rate, and commodity prices.
- Mitigating factors identified:
  - Stronger GDP growth supported by prospects of stronger donor financing.
  - Efficient use of the 2021 SDR allocation (SDR 147.6 million equivalent to 6.3 percent of 2021 GDP).

### Stress tests, scenario results, and key thresholds
- Stress testing framework and insights:
  - The most extreme stress test is the test that yields the highest ratio in or before 2033; one-off breaches are presented where relevant.
  - Commodity price shock magnitudes are based on the commodity prices outlook prepared by the IMF research department.
  - All additional financing needs generated by shocks under stress tests are assumed to be covered by PPG external MLT debt in the external DSA; default terms of marginal debt are based on baseline 10-year projections.
- Noted customization and settings in stress tests:
  - Some tests indicate "Yes" for changes to default settings; others "No" or "n.a." as applicable.
  - Thresholds referenced in figures/tables include values such as 30, 140, 10, 14, and 35 (as shown in tables and figure captions).

### Selected indicators and projections (extracts from the external and public DSA tables)
- External debt (nominal) and PPG external debt (percent of GDP) projections and historical values (selected):
  - External debt (nominal) series excerpt: 17.7, 20.2, 19.9, 34.4, 32.5, 30.5, 28.2, 25.4, 23.4, 10.7, 6.8, 18.9, 22.7 (presented in Table 3).
  - PV of PPG external debt-to-GDP ratio (selected projection years): 21.0, 29.7, 32.0, 29.1, 26.9, 24.3, 22.4, 8.9, 4.5 (as reported).
  - PV of PPG external debt-to-exports ratio (selected): 294.4, 302.1, 257.5, 220.3, 189.0, 150.5, 134.6, 64.6, 22.1.
  - PPG debt service-to-exports ratio (selected): 8.5, 7.5, 11.4, 23.3, 22.5, 21.0, 12.2, 11.8, 9.9, 8.4, 1.7.
  - PPG debt service-to-revenue ratio (selected): 4.1, 3.2, 4.4, 14.3, 17.4, 16.9, 10.2, 11.2, 9.5, 6.7, 1.9.
- Gross external financing need (Million of U.S. dollars), selected projection values:
  - 327.5, 423.3, 626.1, 595.3, 590.6, 653.9, 619.8, 587.3, 519.3, 314.3, 6682.0 (as reported in Table 3).
- Key macroeconomic assumptions (selected):
  - Real GDP growth (in percent): 0.3, 3.1, 1.8, 3.3, 6.0, 5.9, 5.7, 5.9, 5.5, 5.0, 1.4, 5.2.
  - GDP deflator in US dollar terms (change in percent): 2.1, 5.3, 14.8, -21.2, -9.5, 5.4, 4.9, 4.8, 4.8, 11.5, 5.5, 4.2, 4.9.
  - Effective interest rate (percent): 1.0, 1.0, 1.2, 3.1, 2.9, 3.1, 2.5, 2.5, 2.5, 2.8, 1.9, 0.7, 2.7.
  - Growth of exports of G&S (US dollar terms, in percent): -9.2, 0.2, 2.6, 12.2, 21.2, 18.8, 19.2, 26.4, 13.6, 15.0, 13.7, 3.3, 16.5.
  - Growth of imports of G&S (US dollar terms, in percent): 0.5, 15.3, 16.4, 3.9, 7.0, 6.9, 6.8, 6.9, 2.7, 11.6, 18.0, 3.0, 9.1.
- Grant and aid-related values (selected):
  - Grant element of new public sector borrowing (in percent): 33.5, 33.5, 32.2, 32.5, 43.4, 46.9, 49.5, 49.6, 42.3 (as shown).
  - Aid flows (Million of US dollars): 530.4, 683.8, 784.9, 482.3, 523.8, 451.0, 433.7, 428.8, 370.3, 353.6, 489.3.
  - Grant-equivalent financing (in percent of GDP) (selected): 16.6, 18.0, 13.9, 11.8, 10.0, 7.7, 2.9, 1.6, 9.2.
  - Grant-equivalent financing (in percent of external financing) (selected): 82.5, 88.8, 88.6, 92.0, 92.0, 89.6, 83.3, 87.3, 87.4.

### Drivers of debt dynamics and realism tools
- Drivers identified in DSA figures and charts (baseline and historical comparisons):
  - Debt-creating flows and unexpected changes include contributions from nominal interest rate, real GDP growth, price and exchange rate changes, primary deficit, current account + FDI, and other debt-creating flows.
  - Residuals capture differences between anticipated and actual contributions on debt ratios and include exceptional financing, changes in arrears, debt relief, changes in gross foreign assets, and valuation adjustments.
- Realism tools and fiscal multipliers:
  - Fiscal adjustment scenarios reference 3-year primary balance adjustments and possible growth paths under multipliers: multiplier = 0.2, 0.4, 0.6, 0.8.
  - Distributional references across LICs for program experience are used to benchmark adjustment magnitudes (e.g., a 3-year PB adjustment greater than 2.5 percentage points of GDP is in the approximate top quartile).

### Public sector debt outlook and sensitivity analysis (highlights)
- Public sector debt (percent of GDP) historical and projected path (selected):
  - Public sector debt series excerpt: 66.0, 66.6, 68.4, 72.7, 65.8, 61.3, 56.6, 52.2, 48.0, 29.9, 22.5, 50.7, 48.9 (Table 4).
- Identified debt-creating flows and primary balance (selected):
  - Identified debt-creating flows (percent of GDP): 3.3, -1.3, 1.2, -7.0, -6.9, -3.1, -4.0, -3.3, -3.0, -1.2, -1.0, 2.5, -3.2.
  - Primary deficit (percent of GDP): 3.4, 2.3, 9.5, 1.9, -0.1, 1.3, 0.0, 0.5, 0.2, 0.2, 0.3, 4.7, 0.5.
- Sustainability indicators (selected):
  - PV of public debt-to-GDP ratio (selected): 69.7, 74.9, 67.1, 62.2, 57.5, 52.9, 48.4, 28.6, 20.4.
  - PV of public debt-to-revenue and grants ratio (selected): 261.3, 243.2, 203.6, 210.5, 202.8, 200.3, 199.3, 145.9, 102.5.
  - Debt service-to-revenue and grants ratio (selected): 58.3, 48.5, 45.8, 35.2, 31.0, 39.5, 35.6, 39.2, 41.2, 44.5, 35.0.
- Sensitivity and bound tests (selected outcomes from Tables 5 and 6):
  - PV of debt-to-exports, debt service-to-exports, PV of debt-to-GDP, debt service-to-revenue show varying outcomes under alternative scenarios, bound tests, and tailored tests (e.g., combination shocks, commodity price shocks). Threshold breaches are indicated in the tables where bold values appear.
  - Total public debt benchmark and PV of debt-to-revenue ratio responses are presented across scenarios, showing increases under adverse combinations (selected illustrative values in tables: 243, 228, 255, 270, 293, 324, 333, 344, 373, 381, 400 for certain scenarios in projection columns).

### Authorities’ views and policy implications
- Authorities’ endorsement and priorities:
  - Authorities agreed with staff’s DSA and reiterated commitment to macroeconomic stability, including external and debt sustainability.
  - Reforms envisaged in the NDP and the ECF arrangement are expected to help achieve macroeconomic objectives.
  - Exchange rate reform (ER reform) will unify the FX market and remove sources of macroeconomic imbalances.
  - Planned growth-enhancing fiscal consolidation, better coordination between fiscal and monetary policies, and structural reforms are expected to strengthen the macroeconomic policy framework and boost donor and investor confidence.
- Statement by Executive Director’s constituency (July 17, 2023) highlights:
  - Burundi suffered from lack of donor support following the 2015 political and security crisis, leading to capital outflows and pressures on international reserves, the exchange rate, inflation, and protracted balance of payments needs.
  - The new administration reengaged the international community, leveraged Fund support (SDR allocation, Catastrophe Containment and Relief Trust, Rapid Credit Facility), and embraced difficult reforms as part of a re-engagement strategy.
  - Authorities seek Fund support to unlock growth potential, contain inflation, implement exchange rate reforms, strengthen governance, and enhance transparency in line with the National Development Plan (2018-27).

*Source: Burundi DSA chapter and tables as provided in the supplied content.*

### Introduction

### Introduction

### Overview and Fund Engagement
- Authorities requested a 38-month arrangement under the Extended Credit Facility (ECF) with access of 130 percent of quota (SDR 200.2 million).
- Purpose of Fund support: address protracted balance of payments (BOP) challenges, rebuild external buffers, reduce public debt vulnerabilities, support implementation of the 2018-27 National Development Plan (Plan National de Development, PND), and catalyze additional donor support.
- Authorities appreciate candid engagement with Fund management and staff and broadly agree with staff’s assessment.

### Recent Economic Developments
- Real GDP growth:
  - Declined from 3.1 percent in 2021 to 1.8 percent in 2022 due to domestic and external shocks including the COVID-19 pandemic, spillovers from the war in Ukraine, adverse weather, rift valley and porcine fevers, and inadequate fertilizer supplies.
  - Expected to rebound to 3.3 percent in 2023 supported by agriculture reforms and investments in fertilizer production.
  - Medium term growth projected to rise to 6.0 percent from 2024 reflecting adoption of a market-based exchange rate, effects of the new mining code, and infrastructure investment projects.
- Risks: downside from external uncertainties (duration and impact of external shocks), rising global energy and food prices, weak global demand, deterioration of regional security, climate shocks, and livestock diseases.
- Inflation:
  - Increased from 18.9 percent in December 2022 to 28.9 percent in May 2023 due to high food inflation and depreciation of the exchange rate to market levels.
  - Projected to remain elevated at 20.1 percent on average in 2023; authorities optimistic about gradual deceleration in the medium term via agricultural production boosts, expected decline in global commodity prices, and tight macroeconomic policies under the ECF.
- External accounts and reserves:
  - Current account deficit widened from 12.4 percent of GDP in 2021 to 15.6 percent of GDP in 2022 due to higher import prices, declining remittances, and a weakened service balance offsetting higher export prices for tea and coffee.
  - Gross international reserves declined from 3.0 months of imports at end-December 2021 to 1.5 months of imports at end-December 2022 despite SDR allocations and Rapid Credit Facility disbursement; ECF disbursements expected to boost reserves.
  - Remittances declined in 2022 but are projected to increase in 2023 and beyond with exchange rate reforms.

### Fiscal Policy and Debt Sustainability
- Fiscal stance:
  - Authorities advancing growth-friendly fiscal consolidation to create space for priority social spending.
  - Fiscal deficit for 2022/23 expected to widen due to revenue shortfalls relative to the FY22/23 budget target and large spending overruns in the first half of FY2022/23.
  - To address the deficit, authorities will contain spending in the second half of 2023 by delaying new investment projects to compensate for large fuel subsidy prepayment.
  - Medium term fiscal balance expected to improve by more than 5.9 percent of GDP to levels below the regional convergence target of 3 percent of GDP.
- Revenue mobilization measures:
  - Streamline tax exemptions and address tax and customs fraud.
  - Digitalize the entire public revenue collection system and procedures.
  - Modernize tax administration and implement the updated strategic plan of the National Revenue Authority (OBR).
  - Introduce new tax measures; OBR implementing customs electronic IT system (ASYCUDA) and rolling out an Electronic Billing System nationwide.
- Expenditure management and PFM reforms:
  - Control spending by focusing on priority expenditures while preserving capital expenditures.
  - Transition to program budgeting for better formulation, execution, monitoring, and effectiveness.
  - Deploy budget resources to education, health, and social protection; adopt fair wage policy to reduce wage disparities and stabilize the wage bill.
  - Improve cash management with cash flow forecasts and gradually roll out the Treasury Single Account (TSA) to local entities.
  - Strengthen public investment management, end extrabudgetary commitments without prior authorization, submit quarterly budget implementation reports to Parliament, and strengthen management of state-owned enterprises (SOEs).
- Public debt:
  - Public debt assessed as sustainable; authorities committed to placing public debt on a sustainable downward path.
  - Re-engage international community to rely more on grants and concessional loans, strengthen debt coverage and monitoring of public fiscal arrears, and develop a short-and medium public sector debt management strategy to be updated regularly.
  - Develop capital markets to enhance effectiveness of debt instruments.

### Monetary, Exchange Rate, and Financial Sector Policies
- Monetary policy actions:
  - Banque de la Republique du Burundi (BRB) tightening monetary policy since July 2022 to curb inflationary pressures.
  - BRB closed the refinancing window accessed by commercial banks to support priority sectors except the agro-pastoral sector.
  - In May 2023 BRB increased reserve requirements ratio from 3 to 5 percent.
  - BRB increased the 7-day refinancing rate to 10 percent on July 3, 2023.
  - Going forward BRB will aggressively mop up excess liquidity to contain inflation while supporting monetary policy transmission and exchange rate unification; improve communication to anchor inflation expectations.
- Modernization of monetary framework:
  - Authorities plan to adopt an inflation targeting monetary framework and set the BRB policy rate.
  - Since 2019 BRB has used a quarterly projection model (QPM) for inflation forecasts to guide data-driven policy rate adjustments.
  - Operationalization of the FPAS system requires institutional reforms; authorities will establish a monetary and fiscal policy coordination committee.
- Exchange rate and FX liberalization:
  - Authorities plan to fully adopt a floating exchange rate regime in line with East African Community Monetary Union (EAMU) objectives.
  - Steps toward exchange rate unification and foreign exchange market liberalization to reduce external imbalances; gradual elimination of FX market restrictions.
  - Official rate to adjust to reflect transactions between all market intermediaries and clients to boost investor confidence, stimulate capital flows, and improve reserves.
  - BRB will introduce an FX market intervention strategy implemented through auctions to smooth volatile market conditions.
  - Liberalization measures include operations of the FX interbank market, efficient allocation of foreign currency, and removal of surrender requirements at the BRB for certain foreign currency accounts.
- Financial sector stability and integrity:
  - Financial sector remains solid with ample liquidity and low non-performing loans (NPLs), but authorities attentive to potential financial stability risks.
  - Capital ratio declined from 27.1 percent at end-March 2022 to 19.0 percent at end-December 2022; capital levels remain above the Basel-III norm.
  - Authorities cognizant of large exposures and net open FX position risks; strengthening supervision to detect FX liabilities and corporate foreign exchange vulnerabilities.
  - Commitment to implement recommendations from the 2022 safeguards assessment.
  - Strengthen Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework, operationalize the Financial Intelligence Unit (FIU), and meet requirements for membership to the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG).

### Structural Reforms
- Private sector development and infrastructure:
  - Promote private sector development through business environment improvements, strengthened public private partnerships (PPPs), infrastructure improvements, vocational training center revamps, and enhanced governance.
  - Adopted a national tourism policy to increase foreign exchange inflows, enhance fiscal revenues, and create jobs.
  - Rehabilitating hydro-electric centers, developing telecommunication infrastructure, and creating local industries for extraction and transformation of mining products.
- Agriculture and mining:
  - Revitalizing the mining sector to optimize contribution to growth and socio-economic development.
  - Enhancing agriculture to ensure food self-sufficiency via mechanization, targeted fertilizer subsidies, wetland development, large-scale irrigation, regionalization of crops, and natural resources management to intensify agricultural and animal production.
- Governance and transparency:
  - Prepare and publish a comprehensive governance diagnostic report with recommendations and a time-bound action plan.
  - Commit to transparency in COVID-19 related spending; Cour des Comptes completed audits of the first and second execution report on COVID-19 expenditures published in January 2023 and June 2023 respectively.
  - Modify bidding questionnaires to capture beneficial ownership for companies awarded COVID-19 related contracts.
  - Adopted the Enhanced General Data Dissemination System (e-GDDS) to enhance data transparency.

### Conclusion
- Authorities remain committed to reforms under the ECF arrangement despite overlapping domestic and external shocks.
- View Fund support as instrumental to anchor macroeconomic stabilization, enable international re-engagement, and support capacity development and implementation of the homegrown reform agenda.
- Authorities seek Executive Directors’ support for their request for Fund support under the ECF arrangement.

*Source: 1bdiea2023001 - Introduction*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1bdiea2023001.pdf_